Suspicion aroused by changes in Chinese contracts

The Prosecutor General's Office began an investigation at the request of State Duma deputy from the Communist Party of the Russian Federation Nikolai Kolomeytsev of Rosneft and Transneft transactions on oil supplies to China. According to Mr. Kolomeytsev, their imprisonment could have occurred in violation of the law. In addition, the deputy believes that the contract renegotiated at the end of February could harm the Russian economy.

A representative of the Prosecutor General's Office told RIA Novosti on Thursday that the department had begun checking the deal between Rosneft and Transneft with CNPC for oil supplies to China. It is being held in accordance with the deputy request of Nikolai Kolomeytsev from the Communist Party of the Russian Federation, sent at the end of February. Based on media reports, Mr. Kolomeytsev asks the Prosecutor General’s Office to assess the consequences of the deal for the country’s economy. In particular, the fact that CNPC provided a country discount of $1.5 per barrel, which Transneft and Rosneft agreed on with the Chinese company at the end of February. Now state-owned companies will lose about $3 billion. Rosneft and Transneft do not comment on this information.

The controversial agreement was concluded back in 2009. In exchange for loans from the China Development Bank to Rosneft and Transneft in the amount of $15 billion and $10 billion, respectively, state-owned companies pledged to supply 15 million tons of oil annually to China via the Eastern Siberia-Pacific Ocean (ESPO) pipeline in 2011–2030. To achieve this, Transneft entered into an agreement to purchase 6 million tons of oil from Rosneft at a price tied to the cost of exports to China. The price was determined using a special formula based on quotes from Argus and Platts FOB at the ESPO end point, the port of Kozmino.

But as soon as deliveries began, in January 2011, problems arose with the contract. The parties had different assessments of the T coefficient, which determined Transneft’s logistics costs for oil delivery. CNPC began to underpay $13 per barrel, since it received oil via a branch from ESPO, a route that is half as long. Transneft responded to this by stating that there is a single network tariff of 1,815 rubles throughout the entire pipeline. per ton (about $65). For Russian companies, losses from CNPC's position for the entire duration of the contract could amount to almost $30 billion.

After lengthy negotiations, the parties agreed at the end of February that CNPC would be given a country discount of $1.5 per barrel. Transneft shareholders have already approved it, and Rosneft shareholders were supposed to do this at an extraordinary meeting on April 10. The state company has not yet announced its results.

Kirill Melnikov

Rosneft and Transneft will be checked by the Prosecutor General's Office