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Nation Pins Hopes on Oil Project with Russia

An official with the China National Petroleum Corp. (CNPC), the company representing China in negotiations with Russia on the Sino-Russia oil pipeline project, said the company is continuing its preparations to receive Russian crude.

"We have not yet received an official announcement from the Russian side," said the official, who declined to be named. "The Chinese and Russian governments are still keeping in close contact on the issue."

The comments were in response to yesterday's reports that Russia and Japan have agreed to build a US$7 billion oil pipeline from Eastern Siberia to Nakhodka on Russia's Pacific coast, near Japan.

The proposed route, which starts from Taishet in East Siberia, was close to a planned Japanese project.

It also suggested building a branch pipeline to Daqing, China's largest oilfield, according to a Reuters report citing Japanese government officials.

The new proposal in fact turned down the Chinese offer to build a direct link from East Siberia's Angarsk to Daqing.

Russia and China signed a non-binding agreement a year ago to build the trunk line that would allow China to import 700 million tons of Russian crude over the next 25 years.

If endorsed, it would be the largest-ever trade project between the two countries.

But the project suffered a setback later on, as some Russian parties argued that a link to Nakhodka would give Russia access to more export markets, such as Japan and the United States.

Japan agreed to finance the Nakhodka proposal.

The CNPC official said they would ignore the media reports and continue working as planned.

Li Fuchuan, a Sino-Russian expert with the Chinese Academy of Social Science, said the spur line is an acceptable result if Beijing cannot push the direct link through.

"It is not a bad result if Russia can transport some of crude via a pipeline and supplement it with oil shipped by rail to fulfill its commitments," Li said.

Early last month, the CNPC initially agreed to buy 10 million tons of oil annually from OAO Yukos Oil Co., Russia's largest oil company, starting in 2006 for six or seven years.

Li, however, doubted whether there were enough reserves in East Siberia to support the pipeline to Nakhodka.

Russia may have to transport crude from West Siberia to feed the pipeline, which could affect its crude exports to Europe, Li said.

The CNPC official tried to play down the significance to China's oil supply of the oil pipeline, since Beijing is diversifying its oil imports and searching for oil in overseas countries to satisfy its needs.

"China's energy supply will not be considerably affected, even if the project breaks down," said the official.

The official also mentioned that China might build a similar crude-oil pipeline from Kazakhstan to western Xinjiang Uygur Autonomous Region.

Once completed, the 1,200-kilometer pipeline would be able to deliver up to 20 million tons of crude to western China annually.

Earlier reports said China and Kazakhstan are expected to start constructing the pipeline this summer.

(China Daily March 23, 2004)

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