Russian state-controlled oil giant Rosneft has agreed to a discount of $1.5 per barrel on crude oil supplies to China National Petroleum Cooperation.
The move resolves a pricing dispute between the two companies over a $22 billion deal to supply crude oil to China for 20 years via the East Siberia-Pacific Ocean Pipeline (ESPO).
China disagreed with the price it had to pay to transport oil through the pipeline and underpaid to push for a discount.
The discount, agreed on at an extraordinary general meeting on April 10, was made on condition that China pay its debt to the Russian firm of $134 million, Rosneft said in a statement on Monday.
Last fall, the sides reached an agreement on changing the terms of oil supplies to China. Under the deal, China agreed to repay its debt of $134 million while the Russian side agreed to change the price formula and negotiate a price discount.
“On condition that the debt be repaid, the price of oil supplied under the agreement will be reduced by a discount of $1.5 per barrel from November 1, 2011, to the period of duration of the contract on the purchase/sale of crude oil,” Rosneft said in the statement.
The controversial agreement was signed in 2009, when China Development Bank agreed to extend loans worth $15 billion and $10 billion to Rosneft and Transneft, in exchange for their commitment to supply 15 million tons of crude oil to China annually via the ESPO.
The supply volumes remain the same under the new price terms.