Page 6 - AsianOil Week 48 2022

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China stresses close energy relationship

with Russia

INVESTMENT CHINA is eager to expand its partnership with cap could be lowered, now that the legislation is
Russia in the energy sphere, Chinese President in place, at a later point.
China has shown no Xi Jinping said last week, days before the EU “Energy co-operation is an important cor-
indication of scaling is set to impose its embargo on Russian crude nerstone of practical co-operation between
back its energy imports. China and Russia, and also a positive force
relationship with China has ramped up imports of Russian for maintaining global energy security,” Chi-
Russia. oil despite the economic slowdown caused by nese news agency Xinhua quoted Xi as saying
stringent COVID-19 restrictions this year, tak- in a letter to a China-Russia Energy Business
ing advantage of the steep discount that Urals Forum. “Xi also said the Chinese side stands
and other Russian blends are currently trading ready to join hands with Russia to push for clean
at compared to global benchmarks. and green energy development, and safeguard
That discount, currently at $20-25 per barrel international energy security and the stability
versus Brent, is expected to grow depending on of industrial and supply chains, thereby making
the success of the EU’s embargo of most Russian new contributions to the long-term, healthy and
oil imports, due to come into force on Decem- sustainable development of the global energy
ber 5. Russia is now scrambling to divert oil sup- market.”
plies that would have flowed to Europe via the Chinese energy imports from Russia, includ-
Druzhba pipeline to sea ports, where they can ing coal, oil and natural gas, have totalled $60bn
be loaded onto tankers for shipment predomi- in value since Moscow launched its invasion of
nantly in Asia. Ukraine in late February, according to Bloomb-
It is unclear to what extent that China will erg data, up from $35bn in the same period of
abide by a separate price cap on Russian oil, last year. Besides oil purchases, predominantly
introduced by the EU and its G7 partners in via the Eastern Siberia-Pacific Ocean (ESPO)
order to deprive Moscow of revenues interna- pipeline, Russia is also sending increasing vol-
tionally. Most shipping and insurance compa- umes of pipeline gas, via the Power of Siberia,
nies are based in EU or G7 countries, and those opened at the end of 2019, in addition to LNG
companies will be prohibited from providing supplies from the Sakhalin-2 and Yamal LNG
their services for handling Russian crude unless plants.
the price cap is adhered to. At a level of $60 per Reports have emerged in the past month that
barrel, the price cap is roughly in line with the Chinese buyers have been reluctant to purchase
price that discounted Urals is already trading Russian oil spot volumes ahead of the EU price
at, which might limit the immediate impact of cap being enacted. But authorities in Beijing
the measure. But the cap might have a greater have still not said whether they will adhere to
impact if the natural price of Urals rises, and the the price cap. ™

P6 www. NEWSBASE .com Week 48 05•December•2022