China in pipeline loan deal with Russia for Siberian oil

China has signed a new deal with Russia for accessing Siberian oil through the East Siberia-Pacific Ocean (ESPO) oil pipeline, with construction of a new branch to the Chinese border running from Skovorodino, some 70 km inside Russia. Construction of the pipeline, with a capacity of 15 million tonnes of oil a year, is expected to start this year itself.

The agreement to set up the pipeline, estimated to cost around $800 million, was signed in Moscow in the presence of Russian prime minister Vladimir Putin and Chinese premier Wen Jiabao.

Under the agreement, Russian pipeline monopoly Transneft and China National Petroleum Corp will build the pipeline with export-backed loans from Chinese banks, Russian deputy prime minister Igor Sechin, said. Russian companies would execute the project.

''All aspects of cooperation have been discussed in the course of negotiations with the Chinese side, including the financial ones,'' the Interfax news agency quoted Sechin as saying. ''We don't have any disagreements," he added.

Chinese banks are expected to lend Rosneft and Transneft a total of $20 billion to $25 billion, at a time when the liquidity crunch has made borrowing difficult.

Rosneft and Transneft are still in talks with China's state-owned CNPC and Chinese banks and the companies have until 25 November to sign the final long-term oil supply deal,  Sechin said.