China pins hopes on oil project with Russia
By Xie Ye (China Daily)
Updated: 2004-03-23 09:07

China still has faith in the gigantic Sino-Russia oil pipeline, despite reports which said that Russia is inclined to build a competing pipeline in favour of Japan.

An official with the China National Petroleum Corp (CNPC), the company representing China to negotiate with Russia on the project, said the company is continuing its preparation work to receive Russian crude.

"We have not yet received an official announcement from the Russian side," said the official, who declined to be named. "The Chinese and Russian governments are still keeping in close contact on the issue."

The comments were in response to yesterday's reports that Russia and Japan have agreed to build a US$7 billion oil pipeline from Eastern Siberia to Nakhodka on Russia's Pacific coast, near Japan.

The proposed route, which starts from Taishet in East Siberia, was close to a planned Japanese project.

The proposed route also suggested building a branch pipeline to Daqing, China's largest oilfield, according to a Reuters report citing Japanese government officials.

The new proposal in fact turned down the Chinese offer to build a direct link from East Siberia's Angarsk to Daqing.

Russia and China signed a non-binding agreement a year ago to build the trunkline that would allow China to ship 700 million tons of Russian crude through the pipeline to China over the next 25 years.

If endorsed, it would be the largest-ever bilateral trade project between the two countries.

But the project suffered a setback later on, as some Russian parties argued that a link to Nakhodka would give Russia access to more export markets, such as Japan and the United States.

Japan agreed to finance the Nakhodka proposal.

The CNPC official said they would neglect the media reports and would continue with work as planned.

Li Fuchuan, a Sino-Russian expert with the Chinese Academy of Social Science, said the spur line is an acceptable result if Beijing cannot push the direct link through.

"It is not a bad result if Russia could transport some of crude via a pipeline and supplement China with some oil by rail to fulfill its commitments," Li said.

Earlier last month, the CNPC primarily agreed to buy 10 million tons of oil annually from OAO Yukos Oil Co  Russia's largest oil company  starting in 2006 for six or seven years.

Li, however, doubted whether there were enough reserves in East Siberia to support the pipeline to Nakhodka.

Russia may have to transport crude from West Siberia to feed the pipeline, which could affect its crude exports to Europe, Li said.

The CNPC official tried to play down the significance of Russia's oil pipeline to China's oil supply, since Beijing is diversifying its oil imports and actively searching for oil in overseas countries to satisfy its demands.

"China's energy supply will not be considerably affected, even if the project breaks down," said the official.

The official also mentioned that China may build a similar crude oil pipeline from Kazakhstan to its western Xinjiang.

Once completed, the 1,200-kilometre pipeline would be able to deliver up to 20 million tons of crude to western China annually.

Earlier reports said China and Kazakhstan are expected to start constructing the pipeline this summer.

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