Exclusive: Chinese state refineries avoid new Russian oil trade

December 28, 2006 Smoke billows from the chimney of an oil refinery in Nanjing, in the eastern Chinese province of Jiangsu. REUTERS / Sean Yong

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  • Synobec, CNOC, Petrosina, Synochem avoid making new purchases
  • Concerns about sanctions are holding back government agencies
  • Some independent refineries continue to import ESPO crude

SINGAPORE, April 6 (Reuters) – China’s state-run refineries respect existing Russian oil deals but are avoiding new ones despite steep concessions, six people have told Reuters who have heeded Beijing’s call for increased sanctions against Russia over Ukraine.

State-run Sinopec (600028.SS), Asia’s largest refiner, CNOOC, PetroChina (601857.SS) and Sinochem have been sidelined from trading new Russian cargo for May loads, but everyone familiar with the matter said. Subject sensitivity spoke anonymously.

Following Washington’s ban on Russian oil last month and the EU imposing sanctions on Russia’s top exporter Rosneft (ROSN.MM), Chinese state – owned companies do not want to be seen as openly supporting Moscow by buying large quantities of oil. ) And Gasprom Neft (SIBN.MM). read more

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“The SOEs are cautious because their actions may appear to represent the Chinese government, and none of them want to isolate themselves as buyers of Russian oil,” said one of the people.

Synobeck and Petrosina declined to comment. CNOOC and Sinochem did not immediately respond to a request for comment.

China and Russia have developed close ties in recent years, and recently announced a “no limits” alliance in February, and China has refused to condemn Russia’s action in Ukraine or call it an invasion. read more

China has repeatedly criticized Western sanctions against Russia, although a senior diplomat said on Saturday that Beijing had not deliberately violated sanctions on Russia.

China, the world’s largest oil importer, is the largest buyer of Russian crude oil at 1.6 million barrels a day, half of which is piped under government-to-government agreements.

Evidence expects that Chinese state-owned enterprises will respect long-standing and existing contracts for Russian oil but avoid new spot agreements.

The fall in Chinese oil imports from China will prompt its giant state refineries to turn to alternative sources, adding to global supply concerns, which pushed up the benchmark Brent oil price in early March after occupying Ukraine in February, near $ 14 a barrel for a 14-year high. 24. Read more

Brent futures fell below $ 110 after the United States and its allies announced plans to issue shares from strategic reserves. read more

‘Risk control and compliance first’

Prior to the Ukraine crisis, Russia supplied 15% of China’s oil imports – half through the East Siberian and Atazu-Alashanko pipelines, and the rest by tankers from its Black Sea, Baltic and Far East ports.

Synobek’s trade arm, UNIBEC, Russia’s leading oil buyer, has warned its global teams at regular internal meetings in recent weeks against the risks involved in dealing with Russian oil.

“The message and tone is clear – risk control and compliance come before profits,” said one source, who explained the meetings.

“Although Russian oil is heavily discounted, there are many issues with securing and paying for shipping insurance.”

Another source close to the refinery, which continues to process Russian crude oil, said Unibek had been told to find an alternative to maintaining normal operations at its plant.

“Beyond exports in March, Russian oil will no longer move forward, coming in April,” the source said.

UNIBEC loaded 500,000 tonnes of Urals from Russia’s Baltic ports in March, the highest volume in a few months, delivered under the Surknutneptagos and Rosneft export tenders, with UNIBEC winning to load between September 2021 and March 2022, according to trade and shipping data.

Its latest Urals contracts will be 200,000 tonnes of April-loading shipments totaling 200,000 tonnes from Russian manufacturer Surgutneftegaz (SNGS.MM), two traders who knew about the contracts said.

In contrast, according to Reuters estimates, India has reserved at least 14 million barrels, or about 2 million tonnes, of Russian oil since February 24, and nearly 16 million barrels by 2021. read more

Other state buyers – Petrosena, CNOC and Synochem – have reportedly boycotted Russia’s ESPO mix for May loading.

Synobek is also having trouble paying for previously agreed contracts because second-hand evidence suggests that risk-free state-owned banks are reducing funding for Russian oil-related contracts.

Debots keep contracts ‘hidden’

Concerns have been raised that some independent refineries, known as depots, which were a group of customers consuming one-third of China’s Russian oil imports, would be allowed to fly under the radar.

“The ESPO trade was really slow and secretive. Some deals are being made but details are being hidden. No one wants to see Russian oil being bought publicly,” said one regular ESPO dealer.

To sustain the oil flow, these fast refineries use alternative payment methods such as money transfer, payment after delivery of goods and use of Chinese currency.

Russian suppliers – Rosneft, Surgutneftegaz and Gazprom Neft and independent manufacturers representing Swiss businessman Paramount Energy – are expected to ship a record 3.3 million tonnes of ESPO from the Cosmino port in May. read more

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Report by Reuters, Sen Aisu and Florence Tan in Singapore; Editing Himani Sarkar

Our Standards: Thomson Reuters Trust Principles.

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