MOSCOW, September 2 (RIA Novosti) - Oil and gas agreements that have been signed between Moscow and Beijing within the last 15 years are beneficial to participating Russian companies since they are provide them with access to new sources of funding and opportunities for growth, according to a report published by the international credit rating agency Moody’s on Tuesday.
According to Moody’s, Russia-China oil and gas deals are not only beneficial to Russian companies, but are also to the advantage of Russia’s energy sector which is currently strained by Western sanctions and competitive risks.
In the future, bilateral agreements between the two countries would allow Russia to diminish its dependence on European energy markets, the report said.
Moody’s explains that China’s projected GDP rates, despite some slowdown, will be considerably higher than Europe’s, where the demand for Russian natural gas has been at a low following the economic downturn in 2009.
The development of East-Siberian oil and gas reserves, currently underused and located in relative proximity to China, will enable Russia to cover the growing energy deficit in that country.
Moody’s explains that China has been assisting Russia in financing and developing its oil and gas industry. Long-term contracts for the supply of guaranteed volumes of oil and gas as well as equity bargains and access to funding from Chinese financial institutions will contribute to the development of new production and transport infrastructure, which is fundamental to ensuring supplies to the Chinese market.
The alternative source of funding is of special importance to Russian oil giant Rosneft in light of US sanctions, as by the end of 2015 it faces the largest loan repayments in the energy sector, which it [Rosneft] hopes to repay through the pre-payment for oil in accordance with the contract it has with China National Petroleum Corporation, Moody’s writes.
Nevertheless, certain problems do exist, as Moody’s claims, connected with Russia’s turn to the East, including possible increased price pressure on the part of China. Similarly, the scale of requisite investments can have a negative impact on the profitability of Russia’s oil and gas sector in the long-run, Moody’s said in the report.
