Saint-Petersburg - Russian oil giant Rosneft and Chinese state firm CNPC signed Friday a $270bn deal to supply China with oil over 25 years as Russian President Vladimir Putin pushes to diversify the country's energy customer base away from Europe.
The agreement between Russia, the world's largest energy producer and China, the world's largest energy consumer - one of the biggest deals in the history of world oil industry - was signed by Rosneft chief executive Igor Sechin and CNPC head Zhou Jiping in the presence of Putin.
"An estimated value of the contract in current market parameters is absolutely unprecedented - $270bn," Putin said in a speech to investors at the annual Saint Petersburg International Economic Forum after overseeing the signing of the deal together with visiting Chinese Vice Premier Zhang Gaoli.
Under the deal, the heavily-indebted Rosneft is slated to receive an upfront payment of around $70bn, Putin said.
Under another deal, CNPC will acquire 20% in an Arctic liquified natural gas project in which France's Total has 20% and Russian independent gas firm Novatek holds the rest.
Putin has made a priority of stabilising Russia's sometimes prickly relations with its giant eastern neighbour at a time when its ties with the West are becoming ever more problematic.
Russia wants to diversify its base of energy customers away from crisis-hit Europe and is aware it has not fully exploited the colossal potential of Asian markets, China in particular.
"Consumption will be growing in China. And in Japan consumption will be growing, too," Putin said. By contrast, he added: "Europe is going through some certain difficulties."
Addressing chiefs of global energy companies like Eni, Exxon Mobil and Statoil, Putin hailed what he called "a new era of cooperation" with Russia's strategic partners.
Top Putin ally Sechin told reporters earlier that the deal would involve the delivery of more than 360 million tonnes of oil over 25 years with a total value of $270bn.
The initial agreement was reached during a visit to Moscow in March by Chinese President Xi Jinping, his first foreign visit after taking over from Hu Jintao as the country's leader.
That agreement pledged to gradually triple the supply of Russian oil to China over the next 25 years from their current level of 15 million tonnes per year. Putin said that under the contract Russia will be sending up to 46 million tonnes of oil to China annually.
The oil in the $270bn deal would be delivered to China from the existing Eastern Siberia-Pacific Ocean (ESPO) oil pipeline that would pump the oil directly to the Chinese region of Mohe.
"The European market is stagnating, the structure of demand is changing - less oil is being bought and more oil products - so it is not a very promising market," said Valery Nesterov, an analyst at Sberbank CIB.
The upfront payment would allow Rosneft, which this year acquired the British-Russian joint venture TNK-BP in a $55bn deal, to cut its debt, Nesterov added.
"It's a landmark deal," added Karen Kostanian, an oil and gas analyst at Bank of America Merrill Lynch in Moscow, noting that the deal would also allow Rosneft to develop new fields in eastern Siberia.
Among a host of other energy agreements signed in Saint Petersburg, CNPC and Russian independent gas producer Novatek signed a deal to send Russian liquified natural gas (LNG) to China.
Under the deal, CNPC will purchase 20 percent in the Russian Arctic project known as the Yamal LNG in which France's Total has 20 percent and Novatek holds the rest. The project is scheduled to start producing gas in 2016.
Rosneft also signed agreements with Eni, Exxon and Statoil on LNG supplies.
Putin said tapping into the potential of the Asia-Pacific markets would allow the country to liberalise LNG exports.
Russia's state gas giant Gazprom is also working to finalise a potentially huge gas deal with China but a commercial contract has so far proved elusive as talks have become mired in pricing disputes.
"Rosneft managed to do what Gazprom has not been able to do yet," said Kostanian.