CNPC caught off guard by Russia's invitation to invest in Vankor Field
Staff Reporter
2014-09-05
10:18 (GMT+8)
A CNPC gas station in Beijing. (File photo/CNS)
China National Petroleum Corporation has been invited to become one of the shareholders of the Vankor Field, the Russian state-owned oil company Rosneft's largest oil and gas field, reports Guangzhou's 21st Century Business Herald.
The invitation came as a surprise to the Chinese oil giant, since its previous proposals to buy shares in Russian oil fields had been repeatedly rejected, according to the report.
Russian president Vladimir Putin extended the invitation to Chinese vice premier Zhang Gaoli after the groundbreaking ceremony of for the Sino-Russian pipeline in Yakutsk, the capital city of Russia's Sakha Republic, which Zhang attended on Sept. 1. The pipeline is expected to transport 5 billion cubic meters of natural gas in 2017 and the amount is expected to rise to 30 billion in the following five years and surge further to 38 billion after another year.
It is yet to be seen whether CNPC will accept the invitation, however. Details such as the percentage and cost of the shares and shareholder rights have yet to be discussed, said a source familiar with diplomatic affairs with Russia.
The oilfield has crude oil reserves that could produce 510,000 barrels per day and has been one of the main sources of the Eastern Siberia-Pacific Ocean oil pipeline.
A CNPC official said the company will put its own interests first, given that its previous proposals were all rejected and in light of the volatile international situation that resulted from Russia's annexation of the Crimean peninsula. Putin said on Sept. 1 that Russia has been cautious about accepting foreign investment, but will not limit Chinese investments since Beijing is considered an ally.
China has attempted to buy shares in the Vankor Field and Rosneft since Russia began developing the oil field in August 2009 but has been repeatedly rejected. Last year Beijing proposed that Russia allow China's sovereign wealth fund, China Investment Corporation, to buy shares in Rosneft, however, Moscow rejected the proposal, citing national security concerns. CNPC has since abandoned plans to buy shares and has offered loans in exchange for Russian oil
One CNPC official had previously speculated that Russia might suddenly offer China shares in the field, due to its demand for foreign funds, as the country's disputes with Ukraine have caused a massive outflow of capital. The Russian ruble's value has declined against the US dollar and the euro and could drop to just 38 rubles against the greenback and 50 rubles against the euro, said experts.
The CNPC official said in his previous comments that even if the company were allowed to be a shareholder in the oilfield, the field's developments would pose many "unfathomable risks." Moscow has "unusual" safety and environmental concerns over foreign funded oilfield developments, some of which are "incomprehensible" to China, he said. Sino-Russian negotiations over an oil pipeline in 2005 fell apart at the last minute, for example, after a Russian environmental group protested on the grounds that the pipeline was too close to Lake Baikal and could hurt the lake's ecosystem.
The Chinese company also has limited cash in hand due to its acquisition of Nexen Energy, which cost US$15 billion. The oil reserves of the company comprise around only two billion barrels, some of which are in oil sands, which makes them more difficult to obtain.
http://www.ft.com/cms/s/0/01ab7166-31f0-11e4-a19b-00144feabdc0.html
