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. Last Updated: 07/27/2016

Rosneft Sets Out Its Vision for China

ReutersPrime Minister Mikhail Fradkov delivering a speech at a "Year of Russia in China" ceremony in Beijing on Thursday.
BEIJING -- Rosneft plans to construct a 200,000-barrel-per-day refinery together with China National Petroleum, and build hundreds of gas stations in China, Rosneft president Sergei Bogdanchikov said Thursday.

Rosneft, the Kremlin's oil vehicle that plans to become a key China player, said the refinery could be located at a site 200 kilometers from Beijing.

"The refinery will be supplied by Russian and Chinese oil," Bogdanchikov said during the "Year of Russia in China" event, which is also being attended by Prime Minister Mikhail Fradkov.

He added that Rosneft wanted to build up to 300 gas stations in the country.

Rosneft has been supplying around 180,000 bpd to China by rail since buying the former key oil production unit of bankrupt oil firm Yukos after a forced state auction in 2004.

Rosneft is also set to become the key supplier via Russia's first pipeline to Asia, due on stream by the end of the decade, as it is speeding up development of rich deposits in east Siberia in addition to its west Siberian production.

Russia has repeatedly said it is looking to diversify its energy exports away from saturated European markets and considers China, the world's No. 2 oil consumer, to be a vital future market.

Gazprom is also planning to build two major gas pipelines to China. Chinese firms are in turn keen to expand into Russia's upstream sector, as the country is believed to hold massive unconfirmed reserves in east Siberia and the Far East.

Rosneft and China's No. 2 energy firm, Asia's top refiner Sinopec, already share a mid-sized oil unit, Udmurtneft, in the Volga region.

Sinopec also has a 25 percent share in the Rosneft-led Sakhalin-3 Veninsk block off Russia's Pacific coast.

China National Petroleum, or CNPC, China's No. 1 oil and gas firm, has yet to establish a big presence in Russia, despite having bought $500 million worth of Rosneft stock during its record $10.6 billion public share offering in July.

Bogdanchikov said Rosneft and CNPC would set up a joint exploration and production venture in Russia, Vostok Energy, in which Rosneft would retain 51 percent.

Bogdanchikov confirmed that his company was seeking to borrow up to $24.5 billion from Western banks, which would be Russia's largest ever syndicated loan, but declined to discuss details. "The consortium will be broadened. There will be banks, which have already served us, and new banks," he said referring to a consortium of banks that helped Rosneft organize the share offering and raise the previous $7.5 billion syndicated loan.

He said the loan would be used for general corporate purposes. Many analysts believe it would help the company buy the remaining assets of bankrupt oil firm Yukos, such as five refineries and two oil production units, when they go for sale.

Bogdanchikov also denied the loan might serve to help Rosneft buy out the Russian shareholders in rival oil producer TNK-BP.

"That's an interesting turn. But to be honest, I'm hearing about it for the first time," he said, answering a question as to whether Rosneft could try to buy a stake in TNK-BP.