After months of flirtatious offers, Rosneft has finally given China’s state-owned energy giant China Petrochemical Corporation (Sinopec) the opportunity to buy a 49% stake in eastern Siberian fields Russkoye and Yurubcheno-Tokhomskoye.
Proven hydrocarbon reserves at the Yurubcheno-Tokhomskoye field are 304.6 million barrels, according to an audit by DeGolyer & MacNaughton.
Located in the Krasnoyarsk region in Eastern Siberia, the fields are not yet producing oil, but once active, will in theory pump 100,000 barrels per day by 2019, much of which will flow eastward to China.
The share sale to China will help Rosneft, one of the world’s most heavily indebted oil companies, to finance capital-intensive projects needed to carry out drilling in the fields. Unable to borrow from Western banks due to sanctions, Russia has turned to China to cultivate foreign financing.
Under the agreement, Sinopec may acquire up to 49% in the East-Siberian Oil and Gas Company (ESOGC) and Tyumenneftegaz, which hold licenses for exploration and development of the fields.
Time is of the essence, as the fields in eastern Siberia will have to make up for the production gap of fields in Western Siberia, where resources are fast depleting. Analysts worry that Rosneft may fail to honor its commitment to China.
Russia is counting on China to become its biggest energy customer as demand from Europe weakens along with diplomatic relations.
Rosneft plans to increase oil exports to China to 1 million barrels per day, about 10 percent or Russia’s total production. Rosneft will also seek billions in pre-payments from China.
The agreement was inked by Rosneft CEO Igor Sechin and the head of Sinopec in Beijing on September 3, where Mr. Sechin is joining Russian President Vladimir Putin on a working visit.
Rosneft also signed an agreement for the Russian company to take over a 30 percent stake in ChemChina Petrochemical Corporation (CCPC), which was agreed in June 2015 at the St. Petersburg Economic Forum.
A separate memorandum of understanding was signed for Rosneft to allow ChemChina to acquire a majority stake in Russia’s Far East Petrochemical Company.