Moscow (Platts)--25Feb2013/520 am EST/1020 GMT

Russia and China may reach a basic agreement on the supply of Russian gas to the Asian giant by the end of March -- in time for the visit to Moscow by Xi Jinping, secretary general of the Communist Party of China -- Russia's deputy prime minister Arkady Dvorkovich said Monday, according to Russian news agency Prime.

"[Russia's] Gazprom and the Chinese partners are in active consultations and talks over gas supply conditions and expect to reach the basic agreement by end March," Dvorkovich said on the sidelines of the Chinese-Russian energy cooperation commission meeting in Beijing, according to the report.

Contractual terms for the supply of gas may be finalized within several months, Dvorkovich was cited as saying.

In 2006, Moscow and Beijing signed an initial agreement for the supply of up to 68 billion cubic meters/year of gas, and agreed to build two gas pipelines -- the western route dubbed Altai and the eastern route.

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In September 2010, Russia's state-owned Gazprom and China National Petroleum Corporation signed a legally binding agreement on the supply of up to 30 Bcm/year of Russian gas to China via the western route. At the time, both sides were hoping to reach an agreement on the gas price by the middle of 2011 and sign a commercial contract by July that year, with supplies starting in 2015.

"There is every opportunity to reach concrete agreements on expanded gas supplies through different routes, first of all via the so-called eastern route," Dvorkovich was quoted as saying Monday.

In December 2012, Gazprom CEO Alexei Miller said the company had restarted talks with China over gas supplies via the eastern route, which he said might be higher than the 38 Bcm/year that was agreed upon earlier.

PROGRESS IN CRUDE SUPPLY TALKS

Russia and China may also reach a concrete agreement on the additional supply of Russian crude to China by the end of March, including supply to the Tianjin refinery project, Dvorkovich was cited as saying.

Russia's state-owned Rosneft and China's CNPC signed an agreement in September 2010 to conduct a front-end engineering design study for a 260,000 b/d refinery in Tianjin, on China's eastern coast. Construction had been expected to start by 2015, but the project has stalled over concerns of its economic viability.

Last week, Rosneft said it had reached "a mutual understanding" with China's Sinopec to significantly boost crude supplies to China.

Rosneft and Russia's national oil pipeline operator Transneft currently send 15 million mt/year (300,000 b/d) of crude to China via an offshoot of the ESPO crude pipeline from Skovorodino in Russia's Far East, under a 20-year contract with CNPC. The deliveries started in January 2011.

--Dina Khrennikova, deepa_vijiyasingam@platts.com
--Edited by Deepa Vijiyasingam, deepa_vijiyasingam@platts.com

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