Alexander Pasechnik, Head of the Analytical Department of the National Energy Security Fund

At the end of November, Moscow hosted the IV Russian-Chinese Energy Business Forum (RCEBF), which was attended by over 300 representatives of large Russian and Chinese companies in the oil and gas, electric power, coal industries, nuclear and renewable energy; heads of federal executive bodies; power equipment manufacturers; representatives of the financial sector and information technology.

The participants of the event discussed a wide range of issues of bilateral cooperation in the energy sector. Within the framework of the RCEBF, contracts were discussed and concluded on the supply of energy resources, the development of technologies, joint research, training, and the involvement of Chinese companies in the procurement of goods and services for projects implemented in Russia.

Reports on the development of cooperation between the two countries in the field of energy at the RCEBF were presented by: Executive Secretary of the Commission under the President of the Russian Federation on the Development Strategy of the Fuel and Energy Complex and Environmental Safety, Chief Executive Officer of PJSC Rosneft Igor Sechin, Deputy Prime Minister of the Russian Federation Alexander Novak, Vice- Premier of the State Council of the People’s Republic of China Han Zheng, Chairman of the Board of Directors of China National Petroleum Corporation (CNPC) Dai Houliang, heads of Russian and Chinese companies.

President of the Russian Federation Vladimir Putin and President of the People’s Republic of China Xi Jinping sent greetings to the forum participants, in which they noted the positive dynamics in the development of Russian-Chinese energy cooperation.

The head of Rosneft, Igor Sechin, made a presentation at the RCEBF on the development of the energy dialogue between the two countries, reporting on progress in 2021 in the segment of oil and gas exports to the Celestial Empire: Russian oil supplies to China in January-October increased by 9.5% – almost up to 72 million tons (second place among the suppliers of “black gold” to the republic after Saudi Arabia, the result of which is 73.8 million tons). The volume of pipeline deliveries of Russian gas by the end of 2022 may grow by 60%; at the same time, in the foreseeable future, the figure will exceed 100 billion cubic meters per year.

The head of Rosneft recalled the Vostok Oil megaproject, the implementation of which “will ensure long-term and guaranteed energy supplies for the growing economies of Asia.” By 2033, oil production under this project should amount to 115 million tons, which is comparable to 2.5% of current world production.

Igor Sechin drew attention to the prospects of the liquefied natural gas (LNG) niche: “Today, relatively small volumes of LNG are exported from Russia to China, but in the future, the volume of LNG supplies may become comparable to supplies under pipeline projects”.

In turn, Chairman of the Board of Directors of CNPC Dai Houliang noted the importance of proper operation of oil pipelines from Russia to China and the Yamal LNG project (in which CNPC owns a stake). “It is also necessary to accelerate the implementation of the Sino-Russian gas pipeline along the Far East route and the Arctic LNG 2 project,” he added.

China buys not only Russian oil and gas. In particular, I. Sechin said that the Russian Federation accounts for almost a quarter of Chinese coal imports – 53 million tons in 10 months of 2021. Only Indonesia supplies more coal to China. In addition, China buys electricity from Russia. According to the results of January-October, its deliveries increased by 33% and updated the record.

As Alexander Novak noted, when trading energy resources, Russia and China are switching to settlements in national currencies: “Such work helps to prevent risks and contribute to the transformation of the ruble and yuan into the status of world reserve currencies.” In addition, the central banks of the two countries are working to create a settlement system without the use of SWIFT. A significant step in the development of settlements in national currencies was the placement by Rosneft in 2022 of a bond issue in yuan in the amount of 15 billion rubles.

Igor Sechin stressed that settlements under foreign economic contracts, primarily for the supply of energy products, were promptly adapted to the new conditions. And he pointed to the current approaches of partners in the field of financial security: “I consider it important to develop clearing settlements between China and Russia, which could then be joined by other interested countries – members of the EAEU, SCO, BRICS. Having an independent settlement system is an important component of financial sovereignty in the modern world.”

A notable contribution to the development of cooperation between the two countries in the energy sector was the publication of the Investment Atlas of Russian-Chinese Energy Cooperation. The document is a comprehensive practical guide to the implementation of joint projects. Zhang Jianhua, Head of the State Energy Administration of the People’s Republic of China, made a presentation of the Chinese part of the Atlas within the framework of the session. Its first part, presented at the previous RCEBF by the Russian side, was devoted to an overview of the current state and prospects for the development of the fuel and energy complex of the Russian Federation.

The Atlas systematizes information about the current state and development plans of the fuel and energy complex industries in Russia and China, management institutions and regulatory policies (including tax aspects) of the two countries, the current insurance system, and project financing of fuel and energy facilities, as well as promising projects in the oil and gas industry, coal and nuclear industry, power industry, renewable and hydrogen energy.

The forum was held in a very positive way. However, a number of problems still remain. First, in order to strategically reorient raw material exports to the East of Russia, it is necessary to speed up the process of expanding the transport infrastructure, both pipeline (Alexander Novak, in his speech at the forum, did not rule out the construction of new oil pipelines from the Russian Federation to China), and maritime (Northern Sea Route), railway and highway “arteries”. The Power of Siberia 2, a promising gas transmission project, the contract for which the parties have not yet signed, requires special attention. Secondly, Russian energy suppliers should not forget about the importance of diversifying exports directly in the Asia-Pacific Region (APR) in order not to lose the proper market margin – these are, say, the promising markets of India, Indonesia, and Thailand.

In addition, due to the permanent tightening of sanctions against Russia by the West, some local difficulties have emerged in the maritime traffic of domestic oil shipments to the Celestial Empire: the Chinese authorities and companies still refuse to recognize shipowners’ insurance documents issued in Russia. Alexander Poshivai, Deputy Head of the Ministry of Transport of the Russian Federation, announced this at the RCEBF, adding that the department offered the Chinese authorities to recognize the insurance certificates of Russian insurers and the Russian National Reinsurance Company (RNRC) provided to ships flying the Russian flag. The official also clarified that Russian insurance certificates meet all international standards, and RNRC’s reinsurance is certified by guarantees from the Central Bank and the Ministry of Finance of the Russian Federation.