Xi’s First State Trip Yields ‘Breakthrough’ Oil Deals With Putin

China agreed to double oil supplies and supported construction of a natural gas pipeline from Russia under “breakthrough” agreements during President Xi Jinping’s first state trip abroad.

OAO Rosneft, the world’s biggest traded oil producer by output, will borrow $2 billion from China Development Bank Corp., backed by 25 years of oil supplies, under accords signed yesterday in the Kremlin. The Russian company also offered China National Petroleum Corp. access to Arctic resources, and OAO Gazprom said it plans to conclude a 30-year gas-supply contract to China by year-end.

Xi is visiting his counterpart Vladimir Putin in Moscow, building stronger alliances with Russia to counter U.S. influence in the Asia-Pacific and the Middle East. Russia is seeking to strengthen ties with its neighbor, the world’s second-biggest economy, boosting crude shipments and opening a new market for gas as demand in Europe stagnates.

“We didn’t come here and waste our time,” Xi said through a Russian translator at the Kremlin ceremony. He told Putin he felt their “souls are open to each other” and said the accords represent a “breakthrough.”

Rosneft will boost oil supplies to China by 800,000 metric tons this year, Chief Executive Officer Igor Sechin said after the signing with CNPC counterpart Zhou Jiping. Annual exports may climb to as much as 31 million tons, or more than 620,000 barrels a day, through three routes, from 15 million tons currently, he said. Russia has a spur to China from its East Siberia-Pacific Ocean link, and can send crude via its Kozmino port or through Kazakhstan.

Resource Access

China will also gain access to energy resources in Russia, the world’s biggest producer of oil and gas. CNPC will work with Rosneft to explore three offshore blocks in the Barents and Pechora Seas and eight onshore areas, Sechin said. Rosneft agreed with China Petroleum & Chemical Corp., or Sinopec, to “optimize” work at Sakhalin-3, saying the project may be expanded.

Sechin signed the agreement for a $2 billion credit facility with China Development Bank President Zheng Zhijie.

Gazprom, Russia’s natural-gas export monopoly, signed an memorandum with CNPC on building a pipeline along the so-called eastern route with shipments of 38 billion cubic meters a year, starting in 2018, CEO Alexei Miller told reporters in the Kremlin. Gas deliveries may rise to 60 billion cubic meters.

The deal may include advance payments from China for gas, Miller said. Gazprom and CNPC plan to set legally binding terms for supplies in June and sign deal by the end of this year, he said.

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