Chinese Groups Look To Northeastern Russia

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

China Petrochemical Group, or Sinopec, and rival China National Petroleum, are in separate discussions with Russia's number two 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 (625 miles) 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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