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. Last Updated: 07/27/2016

RZD to Rail Five Times More Crude to China

Yukos, the nation's second-largest oil company, said Monday an agreement with Russian Railways, or RZD, to boost crude shipments to China fivefold by 2007 will support the company's efforts to tap new fields in eastern Siberia.

RZD agreed to deliver to China 6.4 million tons of Yukos' crude (128,000 barrels per day) this year, 8.5 million tons next year and 15 million tons in 2006, the companies said. Yukos will pay the railway company 35 billion rubles ($1.2 billion) this year, up 46 percent from last year.

"The contract will facilitate the development of new oil fields in eastern Siberia," Yukos CEO Simon Kukes said in a joint statement. "In many aspects, shipping crude by rail is more promising than sending it by pipeline."

Yukos is increasing rail deliveries to China after Russia stalled plans to build an oil pipeline to China from Siberia. The company's project to build a $2.8 billion link to Daqing faces competition from a counter-offer by Japan to help fund a pipeline from Siberia to the Pacific port of Nakhodka. Russia's pipeline monopoly Transneft, which backs the Nakhodka plan, says it needs more time to study pipeline routes in Siberia.

RZD and Yukos will agree on the volumes of shipments to China every year between 2007 and 2011, the companies said in the statement. Yukos sent 3 million tons of crude to China last year.

Yukos will need to buy or lease 12,800 rail cars to transport oil in 2006, up from 130 in 2001, RZD said.