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. Last Updated: 07/27/2016

China Offers $25Bln Oil Loan

APSechin with Chinese Deputy Premier Wang Qishan in Beijing on Tuesday.��
China has agreed to lend Rosneft and Transneft $25 billion in return for supplies from huge new eastern Siberian oilfields that will power its economy for the next two decades.

Rosneft and pipeline monopoly Transneft on Tuesday signed a long-delayed deal to borrow the money from China Development Bank during talks in Beijing, a source close to the deal said.

"We agreed on supplies of 15 million tons of oil every year over a period of 20 years," Deputy Prime Minister Igor Sechin told state news channel Vesti-24. He said a separate loan deal was signed but gave no further details.

Rosneft and Transneft declined to comment.

Beijing has abundant cash that Moscow needs to access as it heads into its first recession in a decade. Some Russian firms are finding it difficult to repay loans and to borrow project financing on commercial markets.

China, which is the world's No. 2 oil importer and has been working hard to win oil supplies from Africa and elsewhere to run its industries, will secure flows from its neighbor.

Talks on the deal stalled in November last year over disagreements about interest rates and state guarantees that China sought from the government.

An industry source said Rosneft, as agreed earlier, was due to receive $15 billion and Transneft $10 billion. The interest rate was not disclosed but the source said it was "not very high" because of high-level state involvement.

Chinese state television reported that Chinese Prime Minister Wen Jiabao met Sechin, who oversees Russia's energy sector and is also chairman of Rosneft.

"They signed a series of agreements about the oil pipeline, loans and long-term crude trade," China Central Television reported.

Transneft and China National Petroleum Company agreed in October to build a spur to carry 15 million tons a year, or 300,000 barrels per day, between the countries' trunk pipelines.

Over 20 years, this adds up to 300 million tons, worth almost $90 billion at current prices, and enough to meet around 4 percent of China's current oil needs.

Transneft needs cash to finish construction of Russia's first pipeline to Asia, a 600,000-barrels-per-day route that will have a link to the Pacific as well as the spur to China.

Moscow had repeatedly warned that if it failed to find a compromise with China it would send its entire east Siberian output to the Pacific coast to supply customers such as Japan.

Rosneft plans to launch its huge Vankor field in eastern Siberia in the middle of this year. Access to Chinese loans will also help it repay some of the debt accumulated when acquiring assets that once belonged to bankrupt oil firm Yukos.

"If the interest rate and the price of oil are favorable, it's a very good sign for the market," Grizan said.

Although China's energy-hungry industry faces a severe slowdown in its export markets, it is keen to ensure that energy does not constrain future growth and force up the prices it pays.

"Demand in the Chinese market by the time the crisis is over will be there," Teymur Huseynov, head of the Eurasia department at risk consultancy Exclusive Analysis, said on the sidelines of International Petroleum week in London.

"The risk is that we'll have supply bottlenecks which will again push the prices up."