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Chinaâ€™s CNPC to buy Russian oil with $1.5/bbl discount

28 February 2012 08:53 (UTC +04:00)

Baku - APA-Economics. Russian oil major Rosneft and pipeline monopoly Transneft have agreed to supply oil to China at a discount of U.S. $1.5 per barrel in exchange for a repayment of a $134 million debt by China National Petroleum Corporation (CNPC), APA reports citing business daily Kommersant.

The agreement, under which Rosneft is expected to lose about $3 billion in revenue, has yet to be approved by the companyâ€™s board of directors. Rosneft is satisfied with the agreement, as China initially insisted on a discount of around $13, the daily said.

The discount is to be approved post factum, as it had already come into effect since November 2011, while CNPC repaid its debt to Transneft in the middle of January.

Transneftâ€™s board of directors cleared the deal on February 22. The deal settles a one-year dispute between Russia and China over the price of oil pumping which started in January 2011. China had cut the initial price by about $13 per barrel saying the transport costs to the port of Kozmino on the Pacific coast used as the basis for the differential applied by Russia for the pumping costs was wrong, as CNPC used a branch of the East Siberia Pacific Ocean pipeline, which is two times shorter than the route to Kozmino.

Under the contract, Rosneft and Transneft took $15 billion and $10 billion 20-year loans from China, and are obliged to supply 15 million tonnes of oil annually in 2011â€“2030.