28 Sep 2010 10:32

Rosneft, CNPC to invest $5 bln in oil refinery (repeat)

Shanghai. September 28. INTERFAX-CHINA - China National Petroleum Corporation (CNPC) and Russia's Rosneft will invest $5 billion in planning and building an oil refinery in China's Tianjin Municipality, Russian Deputy Prime Minister Igor Sechin said Tuesday.

The two parties plan to complete a feasibility study for the project within six months.

"We have agreed to start work on the study. I think it will take about half a year," Sechin told reporters ahead of a groundbreaking ceremony for the refinery following the latest round of the Russia-China energy dialog.

Rosneft and CNPC signed the deal on Tuesday to start the study. Sechin said at the groundbreaking ceremony that the companies would invest around $5 billion in the project.

Rosneft will own 49 percent of the East Petrochemicals joint venture (JV), and CNPC will own the rest. The JV will build a refinery with potential annual crude throughput of 13 million tons.

"This will be the biggest JV in Russian-Chinese cooperation with an investment of $5 billion at the initial stage alone," he said.

The initial stage includes the feasibility study, and design and construction. The money will be invested according to a plan which will soon be approved.

The project's second stage involves building a network of 500 filling stations in Northern China. "We are hoping that the filling stations with the CNPC and Rosneft logos will embody the friendship and cooperation between the two countries," Sechin said.

Chinese Deputy Premier Wang Qishan said he hoped the refinery would be built by 2015. "I am hoping the facility will be built during the Twelfth Five-Year [Plan] period [between 2011 and 2015]," he said.

Wang said energy cooperation between Russia and China was developing very well in all areas. "We're approaching an important breakthrough stage in some projects," he said.

The refinery will receive 70 percent of its oil from Russia and the rest from Arab countries, Russian Deputy Prime Minister Sechin said earlier on Tuesday, without saying from where precisely the Russian oil would be sourced.

Russia and China have so far signed a deal for the latter to receive up to 9 million tons of oil per year via a spur of the Eastern Siberia-Pacific Ocean (ESPO) pipeline. They have agreed that oil purchased at the Russian port of Kozmino could go towards feeding the refinery in Tianjin.

"The dynamics of our cooperation will increase, and with them oil and petroleum product supply to China," Sechin said, when asked whether crude for the refinery would be procured at Kozmino, the ESPO pipeline's terminus.

Rosneft chief Eduard Khudainatov said before the groundbreaking ceremony that the agreement on crude delivery to the Tianjin refinery would be separate and would not be governed by the inter-governmental agreement between Russia and China on the 9 million tons of ESPO oil via the pipeline spur. "This will be another document," he said. Khudainatov also said he would not rule out oil for the refinery being bought at Kozmino.

Khudainatov said during the ceremony that Rosneft and CNPC were working together on upstream projects in Russia and would take downstream projects forward in China. "We have good partnership relations and I think this project will be even more successful than our other projects with CNPC," he said.

Rosneft said in a press release that a preliminary study by the East China Petroleum and Natural Gas Exploration and Design Institute suggests that the refinery, with an annual throughput 13 million tons and light products yield of over 80 percent, should be located near Beijing - in one of the China's largest commercial and industrial regions.

Rosneft's Khudainatov said in the press release that the refinery was "a milestone in the history of Russian-Chinese relations. This is another step in developing cooperation between largest oil companies of our countries."