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Russia news roundup

Russia recently became the world's biggest producer of oil, according to US government figures. As such, the country plays a hugely important role in the global energy market, which in turn forms an integral part of the Russian economy. Here, we take a look at the latest key developments in Russia's oil and gas industry.

Chinese funding for Russian Arctic natural gas project

Chinese investment in the $27 billion Yamal Arctic natural gas scheme demonstrates that Russian energy projects can move forward regardless of US sanctions, according to the chief executive of French oil giant Total.

Located on a Siberian peninsula jutting into the Kara Sea, the project is aiming to construct a liquefied natural gas (LNG) plant with annual capacity of 16.5 million tons to capitalise on the resources of the South-Tambeyskoye field, which holds proven and probable reserves of 926 billion cubic metres of natural gas. It is intended to help Russia reduce its reliance on selling gas to Europe by increasing exports to Asian nations.

Western sanctions have forced Russia to seek $12 billion in loans from Chinese banks in order to push forward with the initiative, but none have been approved to date. 

However, the $40 billion Chinese state-run Silk Road Fund this month announced it would provide some of the necessary capital in exchange for a 9.9 per cent stake in Yamal. Patrick Pouyanne, chief executive of Total, hailed the move as a "clear commitment" from China in Russian energy developments.

Silk Road has now joined Total, Novatek and the state-owned China National Petroleum Corp as partners in Yamal.

"This project is part of an intergovernmental agreement between Russia and China," Pouyanne was quoted by the Wall Street Journal as saying.

Rosneft CEO: Chinese oil deals worth $500bn

Oil deals with China will be worth around $500 billion to Rosneft over the next 20 years, according to the state-run oil company's chief executive Igor Sechin.

Speaking at the East Economic Forum in Vladivostok, Sechin touted his firm's ability to secure deals with Chinese organisations.

"Taking into account mutual trade and the existing contracts, the total value of cooperation with our company [and the Chinese] through 2035 will amount to $500 billion at current prices," he was quoted by Forbes as saying.

China National Petroleum Corp president Wang Yilin revealed the two nations are in talks about the possibility of increasing Russian oil supplies to China.

Currently, China imports 15 million tons of oil per year from Russia via a Siberian pipeline. Yilin explained: "We are working on building a separate pipeline to increase the supply."

Russia could break Gazprom monopoly on gas exports

Russia could allow companies other than Gazprom to export natural gas, according to energy minister Alexander Novak.

Gazprom, the world's largest extractor of natural gas, has held a monopoly over pipeline gas exports since 2006, with more than half of its revenues stemming from gas sales to Europe.

At the same time, the likes of Novatek and Rosneft have been competing for the exporting rights, having already successfully challenged the Gazprom monopoly on sales of seaborne LNG.

According to Reuters, Novak this week told a conference: "The exporting channel should stay, but in order to increase effectiveness on the whole, we believe that the access [of companies other than Gazprom] should be mentioned in the state strategy."

Oil and gas companies account for 98% of Russia's corporate profits

An overwhelming 98 per cent of profits generated by large Russian companies in 2014 stemmed from the oil and gas industry, according to a report from news agency RBC.

The list of Russia's 500 biggest companies revealed that their combined revenues represented more than three-quarters of the country's total economic output, reports the Moscow Times.

The rating was topped by three energy giants: Gazprom, which generates eight per cent of GDP with revenues of $143 billion in 2014; privately run LUKoil, which saw revenues climb by 24 per cent to $122 billion; and state-run rival Rosneft, which recorded a 16 per cent rise to $96 billion.

In total, firms in the energy sector enjoyed combined profits of $52 billion, compared to around $1.2 billion from all other companies put together.

Energy ministry: Significant opportunity for Russian gas exports to Asia Pacific

Russian oil and gas exports to countries in Asia Pacific could rise substantially over the next two decades, according to the country's energy ministry.

In a new draft energy strategy, the ministry predicted that oil exports to Asia Pacific could climb by up to 2.2 times and gas exports by as much as nine times between now and 2035 as a result of soaring demand from the region.

"This opens new opportunities for the Russian fuel and energy sector, but requires huge investments into development of the relevant energy transport infrastructure," the ministry explained.

The expected surge in exports to Asia Pacific would help to offset the continuing decline for Russian oil from European markets.

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