By John Helmer, Moscow
Transneft, the state-owned Russian oil pipeline company, is now refusing to pay state-owned oil producer Rosneft $26 million in money Transneft claims that the China National Petroleum Company (CNPC) should pay for pipeline deliveries of crude oil, but won’t or hasn’t.
The conflict has also revealed discounting tactics affecting all shipborne cargoes of crude oil between the world’s largest energy exporter and the world’s largest energy consumer.
The pricing dispute has been made public in unusual detail by Transneft, which has been claiming that CNPC is shorting its payments for about 312,000 barrels piped to Daqing each day by 2% to 3%. That is the price discount off the East Siberia-Pacific Ocean (ESPO) marker fixed for spot-priced crude cargoes delivered by rail for tanker loading at the Kozmino  port terminal on the Sea of Japan.
Officially, CNPC and the Chinese government will not comment on the dispute at all. A month ago, they cancelled a negotiating session scheduled in Moscow, but it isn’t clear why. One reason m ay be that there was already an agreement in principle between Moscow and Beijing to end the price dispute, making the additional negotiating session superfluous.
A Rosneft insider told Fairplay there is no ongoing dispute between Rosneft and CNPC, and he doesn’t know why Transneft has been making such a fuss in leaks to the Moscow press.
Transneft is obliged to deliver 6 million tonnes of crude per annum as part of its obligation for repayment of a $10 billion Chinese bank loan originated in 2009, and charging 6% interest over 20 years. Rosneft received a parallel loan of $15 billion on the same terms in exchange for delivery of 9 million tonnes of crude per year.. Transneft receives its portion of the oil from Rosneft’s oilfields, and must pay Rosneft for it.
Transneft spokesman Igor Dyomin acknowledged today that the fight with CNPC is over. “We have finally reached an agreement with the Chinese party on the tariffs, and they started paying off the debt. Currently they have suspended the payments, and we are not ready to comment on the reason why.”
Dyomin confirms there remains a problem between Transneft and Rosneft. “Yes, there is such a debt [for $26 million]. According to the contract with CNPC, Transneft sells part of the oil on its own, although most of it comes from Rosneft. When the Chinese party stopped paying the full price, Transneft automatically got into debt before Rosneft. The tariff [crude oil price] between Rosneft and Transneft is set by the Federal Tariff Service basing on various parameters like volume of investments and expenditure. This tariff is revised annually. The tariff between Transneft and CNPC is set by the market price of ESPO oil, and the quality of the oil is checked in Kozmino by Russian and Chinese experts.”
Dyomin’s reference to ESPO confirms this is a brand-new crude oil pricing formula for Russian oil exports. “ESPO is an independent oil benchmark, but it’s a new one, and it still has to find its own way on the market. Currently traders associate it with Dubai Crude, but it has been said that ESPO is the best of the new types of oil due to its outstanding characteristics.”
Mikhail Perfilov of Petroargus, a leading Russian oil analyst, told Fairplay he believes the pricing dispute with CNPC has been settled.
Note: CNPC also refused this week to accept a 30-year delivery agreement with Gazprom. The price difference for natural gas shipments by land pipeline between Gazprom and CNPC at this stage of the negotiations is about $100 per 1,000 cubic meters, with the two sides still arguing over a compromise between $250 and $350 per 1,000 cubic meters.