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Putin Offer to Sell Assets to China to Aid CNPC, Sinopec

President Vladimir Putin
President Vladimir Putin Russian President Vladimir Putin said, “Overall, we take a cautious approach to letting in our foreign partners, but we of course set no restrictions for our Chinese friends.” Photographer: Sergei Chirikov/AFP via Getty Images

China’s biggest energy companies stand to benefit from Russian President Vladimir Putin’s offer yesterday to sell a stake in the country’s second-biggest oil project to “Chinese friends.”

Putin made the offer in a meeting with Chinese Vice Premier Zhang Gaoli near Yakutsk, East Siberia. OAO Rosneft, Russia’s biggest oil company, produced about 440,000 barrels a day from the Vankor project in the three months to June 30, equivalent to about 4 percent of China’s daily demand.

Russia is turning to China to spur its economy as relations sour with the U.S. and Europe over the Ukraine crisis. Moscow-based Rosneft was added to American sanctions July 16 after the U.S. government froze its Chief Executive Officer Igor Sechin’s assets abroad and slapped a visa ban. Rosneft pumps 40 percent of Russia’s crude.

“It’s a huge opportunity for Chinese oil companies such as Sinopec and PetroChina to get into upstream in Russia,” said Simon Powell, head of oil and gas research as CLSA Ltd. in Hong Kong, referring to exploration and production. “PetroChina and Sinopec have a lot of free cash and it’s just across the border.”

PetroChina Co. is the listed arm of China National Petroleum Corp., the country’s biggest oil and gas producer. Sinopec, or China Petroleum & Chemical Corp., is the listed arm of Asia’s biggest refiner China Petrochemical Corp.

CNPC signed a $400 billion deal with Russia’s state-run gas producer OAO Gazprom in May to import 38 billion cubic meters of gas annually over 30 years starting as soon as 2018.

‘Chinese Friends’

“Vankor is one of the biggest production operations today and very promising,” Putin said in the meeting. “Overall, we take a cautious approach to letting in our foreign partners, but we of course set no restrictions for our Chinese friends.”

Rosneft may offer as much as a 49 percent stake to China for $4 billion to $5 billion, according to Valery Nesterov, a Sberbank Investment Research analyst. Vankor is Russia’s second-largest oil producing project with almost 500 million metric tons of recoverable reserves, Nesterov said.

The press service of Rosneft declined to comment. CNPC and Sinopec’s Beijing-based spokesmen didn’t answer calls to their offices.

Rosneft is the most active among Russian companies in building ties with China. Last year, it signed a $270 billion, 25-year supply agreement with CNPC as European demand fell. In October, it agreed to an $85 billion, 10-year oil-supply deal with China Petrochemical.

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