Although no concrete promise was made after his China visit, Putin did expressed his hope for Chinese enterprises to join Russia's oil/gas development, which is exactly what Chinese oil enterprises want. The agreement on strategic cooperation reached between China National Petroleum Corp. (CNPC) and Russia's GASPROM, as well as China's pledge of huge investment in Russia, can be regarded as a substantial step forward.

Giants join hands

On October 14, CNPC and GASPROM signed an agreement on strategic cooperation.

GASPROM, the world's largest natural gas producer and exporter, taps Russia's gas fields and condensate gas fields, and its output takes up over 95 percent of Russia's total.

Undoubtedly, Sino-Russian cooperation will be carried out in the realm of natural gas. In November 2003, CNPC completed with Russia's RUSIA and KOGAS of the Republic of Korea (ROK) the feasibility studies on the project of gas transmission from Russia's Koyukta field to China and the ROK. However, the program was objected by GASPROM. The strategic cooperation this time is expected to help realize the project as soon as possible.

Since GASPROM merged Russia Petroleum not long ago, the cooperation between China and Russia is likely to cover the oil field. Russia Petroleum holds 900 million-odd tons of oil in the Siberia oil/gas-containing basin, and the allowable exploration and exploitation of the oil reserve estimated at 700 million tons in 10 zones in eastern Siberia.

Opportunity comes

Although Putin made no promise on oil pipeline, he did express his hope for China to expand transportation and to participate in oil/gas exploitation and related infrastructure construction in Russia's Siberia and in the Far East.

"It is an opportunity for Chinese enterprises," positively commented by Liu Keyu, an expert from CNPC oil economy and information research center. In 2002, due to Russian government's opposition, CNPC was forced to quit bidding for share holding in Russia's Slavneft, Chinese enterprises have since achieved no progress in the field related to Russia's oil and gas.

Prior to this, there had always been limitation in Russia's opening-up in the realm of oil and gas, especially in the upper reaches. Production sharing agreement is diminishing, which is still being carried out only in the gas project in Shahalin. However, Putin's statement of his stand shows that Russia has begun to hope for the entry of foreign investment to speed up the exploitation of oil/gas resources in the Siberia region.

Important turn

Chinese enterprises' participation in prospecting Russia's oil and gas makes it hopeful of laying a foundation for an early construction of a crude oil pipeline between China and Russia. An increase in geological exploration will help make a full evaluation of Russia's energy reserve, let Chinese consumers know the amount, type and time limit of Russia's obtainable energy products, and finally lead to a decision acceptable to both sides, said Putin during a primetime interview by China Central Television (CCTV).

An important change Putin made in his attitude toward energy cooperation during his China visit is that, while stressing Russia's national interest, Putin also took the interest of his country's cooperative partner into consideration.

It is very hopeful of leading the pipeline from Russia's Far East to China, said Han Wenke, deputy director of the Energy Institute under the National Development and Reform Commission (NDRC). Russia has made its attitude clear: whatever programs are adopted, China's need is to be taken into account. After all, expanded energy trade will be a main impetus to a steady growth of bilateral trade, which is what the two countries are striving for.

A senior expert with the PetroChina Exploration and Development Research Institute affirmed that a China-Russia crude oil pipeline will "definitely be built, this is only a matter of time". All depends on whether the exploration and exploitation amount of oil in Siberia can meet the demands of both China and Japan for a total of 80 million tons per year. Currently, Russia can only supply 30 million tons annually.

Analysts say there will not be a substantial rise in the exploration and exploitation of oil within a short period of time, at least in one or two years. The reason is that Russia has planned to increase the crude oil to be transported to China through railways to 15 million tons by the year 2006, which is already equivalent to half of the amount transmitted through pipeline.

What is noteworthy is the above-mentioned Sinopec expert holds that presently it may well be an option for China to buy oil form Nakhodka off the Pacific Ocean because, even if there is a pipeline to Daqing, the oil imported also needs to go southwards from Daqing.

By People's Daily Online