Chinese Oil Looks To Northeastern Russia For Reserve Growth

China's two biggest state owned oil companies are in talks to buy stakes in the Yukos Oil Company's oilfields in northeastern Russia that may boost the reserves of their listed units, a Yukos official has said.

China Petrochemical Group, or Sinopec, and its domestic rival China National Petroleum Corp., are in separate discussions with Russia's second largest oil company to invest in fields bordering Irkutsk region and Sakha autonomous republic, said Sergei Prisyazhniuk, Yukos' chief Beijing representative. The fields are about a thousand kilometers north of China's border with Russia.

Chinese producers are trying to find oil abroad to supplement declining domestic reserves and reduce dependence on foreign suppliers, particularly in the Persian Gulf which last year supplied about 60 percent of the country's imported oil.

“China wants to diversify its fuel sources away from the Middle East because of political tensions there.” said Gordon Kwan, an analyst with HSBC Securities in Hong Kong. “It's showing a growing preference for oil assets closer to home, such as those in Russia and Indonesia, that are easier to transport.”

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