Fitch: Russia, China energy dialogue results uncertain

Fitch Ratings said that the four energy agreements signed between Russia and China are short on concrete details and could therefore prove elusive in their results.

Among the agreements is one to supply up to 80 billion cubic meters of gas to China, but no sooner than 2011 and another for the commissioning of a study to explore an oil spur into China from the planned East Siberian Pacific Ocean crude oil pipeline, the agency said.

"It is interesting that Russia and China can agree on gas supplies five years from now, but when it comes to the more important issue of supplying Siberian oil in the near term, negotiations become complicated," said Jeffrey Woodruff, director in Fitch's Energy team based in Moscow.

"It makes one wonder how serious the Russians are about striking an energy deal with the Chinese after all."

Of additional concern to Fitch is the total cost of the planned gas pipeline to China, which is expected to be 3,000 kilometers in length, the agency said, adding that initial estimates are in the range of $3.0 billion to $4.5 billion based on conservative assumptions of $1.0 million to $1.5 million per kilometer of pipe.

Gazprom (BB+/stable), which is expected to finance the Russian portion of the pipeline, has tended to incur higher pipe costs on other projects such as the North Tyumen-Torshok pipeline or the Bluestream pipeline, Fitch said.

On a positive note, the agency added, the gas agreement with China comes at a time when TNK-BP (BB+/positive/B) is reported to be offering to create a consortium with Gazprom to develop the Kovykta gas field in East Siberia.

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