Thursday, February 25, 2016

Russian-Chinese energy co-operation

For the Centre for Eastern Studies, together with Szymon Kardaś, we discuss the current state of and prospects for Russian-Chinese energy co-operation: 
The oil sector has been the major element of Russian-Chinese energy cooperation. The years 2013–2015 saw a significant increase in the volume of crude oil exported by Russia. In 2015, China became the main importer of Russian oil; Russia became the second largest supplier of oil to the Chinese market, after Saudi Arabia. From Beijing’s perspective, supplies of Russian oil are of strategic importance because the main supply routes are overland routes. Russia, for its part, is interested in boosting its export because of its deteriorating position on the European market, which hitherto has been considered a strategic market. 
Cooperation in the field of natural gas has been less advanced; so far Russia has exported only insignificant amounts of liquefied natural gas (LNG) to China. China is less dependent on the import of gas (its own production covers around 70% of the demand). Beijing has been dynamically developing its LNG infrastructure, and has at its disposal gas pipelines which connect China with producer countries in Central Asia. Additionally, all the projects carried out within the framework of Russian-Chinese gas cooperation are being hampered by the financial problems Moscow is experiencing.  
Energy cooperation is and will remain the most important component of Russian-Chinese economic relations. In the present form of this cooperation, Russia has mainly played the role of China’s oil base. The process of Chinese companies investing in oil production in Russia is progressing more slowly than before; most of the agreements made regarding this matter are still framework agreements. In the mid-term perspective, however, a qualitative change to the present model should be expected. It is very likely that Chinese companies will enter the Russian upstream sector, especially taking into account the financial standing of the Russian energy sector and China’s interest in gaining direct access to oil fields.
Read the whole analysis here: 'The oil friendship'

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