BEIJING: Russia, the world's top crude producer, rejected a Chinese request for more Siberian pipeline oil, saying the link is already pumping at full capacity and additional volumes are not available, two Russian state industry sources told Reuters.
Russia started the landmark deliveries to China, the world's second largest crude oil consumer, through the first stage of the East Siberia-Pacific Ocean (ESPO) pipeline at a pace of 300,000 barrels per year on January 1 2011. The sources said China had asked for at least 600,000 bpd once the second stage of the pipeline, which extends the line to terminate at the Pacific port of Kozmino, is launched by the end of 2012.
But, one of the two sources said, Moscow wants to diversify its customer base through seaborne supplies to the Asia Pacific region via ESPO. The pipeline was financed by a $25 billion landmark loans for oil deal from China Development Bank, of which $15 billion went to the supplier of the oil, Rosneft, and $10 billion went to pipeline monopoly Transneft.
Last week, Moscow and Beijing settled a dispute over transportation tariffs after Russia made a relatively small price concession which, analysts said, reflected China's dwindling options for increased crude supplies. China, Iran's largest crude buyer, has scoured the world for additional crude to replace lost imports from the Islamic Republic following a dispute over the terms of annual contracts. China's main importers of Iranian crude are refiner Sinopec and Zhuhai Zhenrong.
To replace lost barrels, China has turned to seaborne exports of ESPO, which faced a drop-off in demand as tighter environmental restrictions ruled out refining it in part of the United States. In Beijing, the chairman of PetroChina, China's second-largest refiner and Rosneft's partner in a new refinery to be builg, PetroChina, said the issue of increased Russian deliveries had not been discussed.
"Currently, we don't have a plan to raise the import volume," Jiang Jiemin told reporters on the sidelines of China's annual parliament session. A senior Russian energy official said Russia was technically constrained by capacity."Of course, they need oil, they are a fast-growing economy. If China needs this (more oil via the pipeline) we are ready. (But) there is no technical possibility right now," the Energy Deputy Minister Yury Sentyurin told Reuters. PetroChina, China's second-largest state oil refiner next to Sinopec Corp , suffered more than 50 billion yuan ($8 billion) losses at its refining department last year and said that loss was "still expanding", Jiang said.
That loss was partly due to China's fuel pricing system under which domestic pump rates often lagged rises in crudes. Beijing is widely expected to introduce a revamped pricing scheme this year to close that gap, when inflationary pressure eases and provided that global crude marketsare not rising too fast. "The new pricing plan is ready, but there has been no window yet to launch that scheme," Jiang said.