Medvedev says Russia signs $85 billion deal to supply oil to China

BEIJING, China – Russia has signed an $85 billion deal to supply oil to China, visiting Prime Minister Dmitry Medvedev said Tuesday, expanding energy trade between the giant neighbours.

The two governments also agreed to jointly construct an oil refinery in Tianjin east of Beijing, Medvedev said in comments posted on the website of the government’s Xinhua News Agency. Xinhua said he made them during an online forum with Internet users.

Medvedev’s announcements suggested the two governments might be committed to speeding up an expansion of energy trade that has been slowed by lack of agreement on prices and other details.

Medvedev said Russia’s biggest oil producer, Rosneft, will supply China an additional 70 million barrels of crude a year for 10 years under the latest agreement, according to Xinhua.

The agreement “testifies to the fact that we have reached a higher and a brand new level of co-operation,” said Medvedev in comments that were translated into Chinese on the Xinhua website. The transcript said questions posed by Chinese Internet users were put to the prime minister by a moderator but gave no indication how they were selected.

China is the world’s fastest-growing energy market. U.S. government data show it overtook the United States in September as the biggest oil importer, driven by rising auto ownership and strong economic growth.

The communist government is eager to obtain Russian supplies, which would help to curb China’s reliance on crude from the unstable Persian Gulf, which Beijing sees as a potential security weakness.

Russian energy companies operate two pipelines to move oil to China and one to deliver gas but further development has been slow.

China imported 170 million barrels of oil from Russia in 2012, according to Xinhua.

The Tianjin refinery will have an annual capacity of 110 million barrels, Medvedev said, according to Xinhua. It will be built by state-owned China National Petroleum Corp., which will own 49 per cent, and Rosneft, which will own 51 per cent.

In June, the two companies signed an agreement for Russia to supply 2.5 billion barrels of oil valued at an estimated $270 billion to China over the next 25 years.