OAO Rosneft outlined a deal to supply China Petrochemical Corp., or Sinopec, 100 million metric tons of crude during 10 years as Russia’s largest oil producer builds ties with buyers in the Asian market.
Russian Prime Minister Dmitry Medvedev valued the potential supplies at $85 billion, speaking to reporters after a signing ceremony today in China. The supplies may begin in 2014, with prepayments and based on prices Rosneft receives in tenders, according to a statement from the Moscow-based company.
Asia’s largest economy is set to become Russia’s largest market for oil after Rosneft and China National Petroleum Corp. signed a 25-year supply accord in June in St. Petersburg. That deal, for about 360 million tons of crude, has a value of $270 billion, according to the state-run Russian oil producer.
“The agreement will help Rosneft arrange additional funding for exploration and production projects and construction of the necessary infrastructure,” Rosneft Chief Executive Officer Igor Sechin said in the statement.
Advance payments from CNPC and Sinopec will help Rosneft, which spent $55 billion buying TNK-BP to become the world’s largest traded oil producer by output, repay debts and fund development. Rosneft, which estimated prepayment from CNPC at $70 billion, didn’t disclose the expected advance payments from Sinopec.
Under the agreement with Sinopec, Russia may partially replace crude oil supplies with oil products, according to the statement.
Rosneft and Sinopec are partners at the Udmurtneft crude producer in Russia.
To contact the reporter on this story: Stephen Bierman in Moscow at firstname.lastname@example.org