China begins receiving oil from Russia

Supply offers nation more import sources, enhances energy security

Energy-rich Russia has started delivering crude oil to China as of the beginning of the year after the contract signed between the two countries last June, which will further diversify China's energy import channels, said experts on Tuesday.

Russian state-owned oil giant Rosneft announced last week that it has received an advanced payment from China for oil deliveries starting this month.

"So long as China can have a diversified supply chain for energy, it will have more advantages in terms of price negotiation in the international market and ensure its energy security," said Joseph Jacobelli, senior analyst with Bloomberg Industries.

He said China is smart in the way it is forming an energy import structure that doesn't solely depend on any particular country.

According to Rosneft, the payment was received in two parts, in line with a mutually agreed-upon schedule.

Rosneft and China's State-owned oil giant China National Petroleum Corp signed long-term crude oil supply contracts during the St Petersburg International Economic Forum in June 2013.

Rosneft plans to supply 360 million metric tons of crude oil to China for a period of 25 years, according to the contract, valued at $270 billion in total.

The advance payment totaled $70 billion with a first subsequent payment of $20 billion.

As China's economy continues to grow, the demand for oil will keep increasing.

China National Petroleum Corp Economics and Technology Research Institute estimated that China's oil demand in 2014 will reach 518 million metric tons with an annual growth of 4 percent. The crude imports will reach 298 metric million tons, up 7.1 percent year-on-year.

In addition to oil exports from Russia to China, the two countries have spent years on pricing negotiations over natural gas supplies to China.

In 2009, the two countries reached a framework agreement in which Russia would deliver about 70 billion cubic meters of natural gas to China annually for 30 years starting from 2014.

China has become the third-largest natural gas user in 2013 with a total consumption of 167.6 billion cubic meters, up 13.9 percent year-on-year, according to the institution.

Duan Zhaofang, a natural gas expert at the institute, estimated that the nation's gas use in 2014 will reach 186 billion cu m, a rise of 11 percent year-on-year.

Russia, for its part, will continue to be the largest energy exporter in the world in the next 20 years, supplying up to 4 percent of global energy demand, according to BP Energy Outlook 2035 published last week.

The outlook said Russia's energy development will grow 21 percent from 2012 to 2035 and its energy use will increase by 20 percent.