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Rosneft signs $270bn oil deal with CNPC

Will double Rosneft’s oil supplies to China.

The Russian oil and gas explorer Rosneft has signed a long-term contract worth approximately $270bn with China National Petroleum Corporation (CNPC) to supply crude oil for the next 25 years.

The deal will help Rosneft to significantly reduce its debts, while developing new remote Arctic fields.

Furthermore, Rosneft may receive an upfront pre-payment of between $60-70bn from China.

Commenting on Rosneft’s upfront pre-payment, JP Morgan analysts told Reuters: “If confirmed, this would be a transformational event for the company's balance sheet: Rosneft could even potentially be able to show a net cash position, though working capital would be negative. The prepayment could minimize financing risks for the leveraged state-controlled oil company.”

Rosneft currently supplies 300,000 barrels of oil a day to China and will supply an additional 300,000 barrels a day from 2015.

Rosneft and CNPC will also jointly build the Tianjin refinery.

The deal is seen as Rosneft’s priority to focus Asian market than on financially-hit European markets. The contract is  part of the framework of the intergovernmental agreement between the two countries.

Separately, Rosneft has signed a contract with China Development Bank to secure a long-term loan of $2bn with a redemption deadline of May 2029. VTB Bank will act as passport bank and agent for the loan.