Russia's Rosneft aims for big boost in oil exports to China - sources

MOSCOW – 9 October 2017: Russia’s largest oil producer Rosneft wants to boost its supplies of oil to China through Kazakhstan to as much as 18 million tonnes (360,000 bpd) per year from around 10 million tonnes in 2017, three industry sources said on Friday.

Such a big increase may significantly drain flows of Urals blend to Europe at a time when Russian oil output has been reduced as part of a global pact to support prices.

“(Rosneft’s head Igor) Sechin would like to boost oil supplies to China to 13 million tonnes per year with a possibility of further increase to 18 million tonnes,” a source familiar with Rosneft’s plans said, adding that there has been no decision yet at government level.

He didn’t specify when the increase was likely to happen.

“This would mean significant oil supplies cuts to Europe,” the source added.

Two other oil industry sources confirmed the plans.

Russian oil production has been steady, at around 10.9 million bpd due to a global pact to reduce total production by around 1.8 million bpd to support weak oil prices.

Rosneft did not respond to a request for comments.

MAIN SUPPLIER TO CHINA

Russia has steadily increased oil supplies to China over the past years to become the main supplier of oil to the country. This year, Rosneft’s total oil supplies to China are set to reach a record high of 40 million tonnes (800,000 bpd).

Rosneft’s influential head Igor Sechin has in the past said his ambition is for the company’s exports to China to reach as much as 1 million bpd.

The bulk of oil supplies to China by Rosneft go via the Pacific port of Kozmino at the end of the East Siberia-Pacific Ocean pipeline, some via the pipeline’s special spur to China and the remains via Kazakhstan and railway.

In August, Russia beat Saudi Arabia to become China’s top crude oil supplier for a sixth month, as independent refiners ramped up purchases and as state-owned refiners bought seaborne shipments from the Russian Far East port of Kozmino.

China’s crude oil imports from Russia last month were 4.426 million tonnes, or about 1.04 million barrels per day (bpd), down 4.5 percent over the same month last year.

Rosneft and China’s CNPC agreed in January on an increase of oil supplies via Kazakhstan through to 2023 with total supplies of 91 million tones over a 10-year period.

Kazakhstan’s energy ministry said Rosneft has not officially applied for an increase in transit volumes to China.

Currently, the supplies are made through Atasu - Alashankou pipeline, the capacity of which has already been upgraded to 20 million tonnes, according to the ministry, while between 2 and 3 million tonnes are used for Kazakstan’s own exports to China.

“The necessity of further pipeline expansion would also depend on the level of volumes as well as the time frame of guaranteed supplies, oil transportation tariff, etc,” the ministry said.

The Kremlin-controlled company has boosted ties with China after privately-run conglomerate CEFC China Energy bought a 14.2 percent stake in Rosneft for $9.1 billion.