Oil and gas producer China Petroleum & Chemical Corp. (Sinopec, SHSE: 600028, SEHK: 0386, and NYSE: SNP) will gain 10 million tons of crude oil from Rosneft Oil per year from 2014.

It said on October 23 that its parent China Petrochemical Corp. (Sinopec Group) had reached an MoU with Rosneft Oil, the biggest oil firm in Russia and under terms of the MoU, the latter will supply 10 million tons of crude oil to it per year from 2014 and the term was 10 years. This was the first time for it to reach a MoU with the Russian oil producer over such a big order and over the following decade, it would gain a total of 100 million tons of crude oil from the latter and the contractual value would hit USD 85 billion in total.

Wang Zhen with the China Energy Strategy Research Institute (CESRI) said in an interview later that both Sinopec Group and its domestic archrival China National Petroleum Corp. (CNPC) had cooperated with Rosneft Oil prior to this, but it was CNPC, the parent of PetroChina Co., Ltd. (shse:601857 and SEHK), that always dominated China's oil and natural gas cooperations with Russia.

Niu Li with the macroeconomic research office of the State Information Center (SIC) under the State Council, the Chinese cabinet, pointed out that this was a great breakthrough as it was CNPC that always cooperated much with the Russia firm in the past and the cooperation indicated that the partnership between China and Russia in energy was advanced further.

Available information shows that China signed a USD 25 billion worth loan-to-crude oil agreement with Russia in 2009 and according to the agreement, the latter will supply 15 million tons of crude oil to the former per year. Russia exported more crude oil to China from then on and in March this year, Rosneft Oil sealed another agreement with China and under terms of the agreement, it will raise the supply of crude oil to the latter by over one time to 30 million tons per year. In turn, it will get USD 2 billion loan from China Development Bank (CDB).

Niu reiterated that Sinopec saw its refining capacity account for about one third of the total of the nation and because of owning less upstream resources, it always suffered a shortage in crude oil. Thus it had been in urgent need of entering into such a long-term partnership with the Russia energy giant.