China prepared to reduce prior pricing requirements on Russian oil
MOSCOW. May 31 (Interfax) - China is prepared to move to a reduction of the initially announced coefficient in a contract for transporting oil, several sources close to the negotiations have told Interfax.
"Where previously the Chinese wanted to establish the coefficient T at 13%, now they are ready to agree to 9%," one source said.
At present, the coefficient T is 0%.
Another source added that according to his information the Chinese are prepared for a further coefficient reduction. He said talks on pricing Russian oil shipments continue Tuesday in Moscow.
Russia and China are expected on Tuesday to convene for the next round of negotiations over fuel and energy issues. The main subject for the talks is expected to be shipments of Russian oil to China via the Eastern Siberia - Pacific Ocean pipeline (ESPO) pipeline system, a matter of some dispute over pricing.
The talks were expected to have covered that question at a meeting slated for discussion on May 24 in Irkutsk that was called off by China, who said its delegation would not be in attendance.
Russia and China will also negotiate shipments of Russian gas to China. The main proposals for this have been coordinated, but no pricing formula has yet been agreed. Gazprom has announced more than once that is looking to agree a pricing formula with China in mid-year.
An 2009 intergovernmental agreement between Russia and China provides for state companies Rosneft and Russian oil pipeline company Transneft to start this year delivering oil to China at 15 million tonnes per year that will run through the ESPO spur to Skovorodino. The cost of the oil is to calculated by a formula that includes a tariff for pumping crude through the second stage of ESPO - from Skovorodino to the port at Kozmino. This tariff was included in the formula at Russia's request, figuring to blend a certain sort of ESPO oil that could trade on world markets. Cina agreed to this pricing formula. Under the intergovernmental agreement China extended Rosneft and Transneft credits of $15 billion and $10 billion.
The Russian companies began shipping oil to China in January.
China National Petroleum Corporation (CNPC) is trying to force down prices for the Russian oil it buys from oil company Rosneft and oil pipeline company Transneft . CNPC thinks it is buying oil sent through a Eastern Siberia - Pacific Ocean pipeline (ESPO)
spur at 2%-3% inflated prices. China is asking for a review of the pricing formula and that it be calculated not as sent from the port at Kozmino (the endpoint of the ESPO pipeline), but from the inception of the spur to China. This means China is requesting that Russia not consider the haul distance in shipping oil to China and has asked for a change to the tariff for pumping oil from the spur to Kozmino. China has also stopped paying Russia the amount it is seeking to have the tariff reduced by. This has bred a debt of $100 million.
A London arbitration court has been selected to hear the disputations. But Russian Energy Minister Sergei Shmatko said a few days ago that the situation over oil to China was not likely to go to court.
The issue of pricing oil shipped to China should have been discussed by Russian and Chinese delegations in Irkutsk this week. However, China informed Russia the day before the meeting that its delegation would not be coming.
Rosneft was earlier considering bringing CNPC on board for projects in opening the Sea of Okhotsk shelf in Magadan Region in Eastern Siberia. But the problems that have arisen have turned the Russian company's eyes to finding Japanese companies as partners.
Russia and China also negotiating shipments of Russian gas to China. The main proposals for this have been coordinated, but no pricing formula has yet been agreed. Gazprom has announced more than once that is looking to agree a pricing formula with China in mid-year.