Energy High On Agenda For Putin Visit To China

Russian Prime Minister Vladimir Putin arrives in Beijing on Monday for a visit expected to yield a slew of deals on cooperation in development of oil, gas and other strategic resources, possibly including a major refinery in the north Chinese city of Tianjin.

Nearly three dozen contracts in energy, mining, transportation and infrastructure development, worth more than $5.5 billion in total, are due to be signed during Putin's visit, Russian Deputy Prime Minister Alexander Zhukov told reporters in Moscow.

Over the weekend, Russian and Chinese negotiators met in Beijing to put the final touches on those agreements, Chinese reports said.

The two sides have "entered a new stage of long-term, strategic cooperation on energy," the official Xinhua News Agency cited Vice Premier Wang Qishan as saying.

Russian Deputy Prime Minister Igor Sechin pledged to work with China to further expand crude oil trade and cooperation, Xinhua said.

Russia is keen to attract Chinese funding, while Beijing has welcomed the chance to further diversify sources for energy needed to fuel its fast-growing economy.

"Why not? It meets the needs of both sides," said Qiu Xiaofeng, an energy analyst at Merchant Securities, in Shanghai.

"Russia is keen to get Chinese refiners to invest and help it develop its resources," Qiu said.

Earlier this year, Moscow signed a $25 billion agreement to help finance a pipeline to supply oil from its vast, untapped Siberian reserves to fast-growing China _ the world's second biggest oil and gas consumer.

In exchange, China was guaranteed a 20-year supply of crude oil _ only part of the $100 billion in China-Russia energy-related deals agreed to this year.

A similar credit may be in the works for Russia's state-run natural gas monopoly, Gazprom, to get started on gas pipelines for its Kovykta project, reports said.

China is viewed as the main market for that project, one of the largest undeveloped gas fields in east Siberia with estimated reserves of 2 trillion cubic meters of gas and more than 83 million tons of gas condensate. Earlier this year, Gazprom warned that slow demand due to the economic crisis might cause delays.

Work on both the Russian and Chinese sections of the Siberian oil pipeline began this spring and is due to wrap up by late 2010, Xinhua said. The pipeline is due to begin supplying China 1.5 million tons of oil annually, starting in 2011.

Chinese media reports said another agreement that might be signed is a contract to build a joint venture refinery in the northeastern city of Tianjin, near Beijing.

Preliminary research has ended for the project, which would be 51 percent-owned by state-run China National Petroleum Corp., and 49 percent by Russia's Rosneft. The plan is to finish building the 15 million ton annual capacity refinery by 2012, with total investment between $300 million-$400 million, the state-run newspaper 21st Century Business Herald reported.

Staff at CNPC headquarters refused comment.

Negotiations between China and Russia on energy deals often have snagged on disagreements over pricing, loan terms and other issues, including Beijing's desire for equity stakes in Russian resources. Like China's own state-run companies, Russia balks at ceding any control to what it views as strategically vital assets.

But Russian's need for financing and markets, and China's huge appetite for resources appear to be propelling such projects ahead, despite such differences.

"Energy cooperation is an important part of the China-Russian strategic cooperative partnership and the two countries' economic and trade cooperation," Wang Guangya, a Chinese vice foreign minister, told reporters while briefing them Friday on Putin's visit.

"The Chinese side is willing to work with the Russian side to promote the two countries' energy cooperation," Wang said.