Russia’s Gazprom said it will supply gas to China at a price close to the one it charges Germany to reassure investors that Russia didn’t offer excessive discounts to win the China deal. The base price for China National Petroleum Corp (CNPC) is about USD360 per 1,000 cubic meters, two government officials in Moscow said, near the average USD366 that Gazprom charged Germany last year, which pays one of the lowest prices in Europe. Gazprom plans to start supplies to China in 2018 to 2020 reaching 38 billion cubic meters annually within five years.

China may be bolstering its emergency crude reserves as refiners expanded commercial stockpiles to a record high last month. Crude inventories rose 4% from April, China Oil, Gas & Petrochemicals, published by Xinhua, said in a report. That is about 33.59 million tons, or 246.2 million barrels, the most in records going back to January 2010. Petrol supplies also swelled to a record, climbing 0.9% to an estimated 7.6 million tons. Refiners accelerated crude imports in April and May as the nation sought to increase its energy security with prices at a “fairly” high level, said Amy Sun, Oil Analyst at ICIS-C1. “We believe high commercial stocks may indicate refiners are potentially stocking feedstock for the government,” she said. “China may be taking this opportunity to start filling strategic storage.” Beijing does not publicly release strategic stockpile figures.

Shares of China Gas Holdings and its largest shareholder Beijing Enterprises Holdings have surged more than 10% on the back of Russia’s long-term natural gas supply deal with China that was signed in May, as they are seen as the biggest beneficiaries with substantial operations in China. The import deal secures long-term energy for Chinese distributors whose growth has been crimped by supply. But the companies may have underestimated the risk of potential delays in gas delivery and the time it will take for output to ramp up. This could be a challenge for China Gas to hit its target to triple distribution volume with Russian gas in the next five financial years, Macquarie Securities analysts said in a research report. They expected Russian gas to start flowing to China in 2019 at the earliest and that a ramp-up to full capacity would take five years. This cautious view is in line with that of the Oxford Institute for Energy Studies, which is affiliated with Britain’s University of Oxford. “Russian infrastructure projects are typically over budget and late,” the report said, which cited an even more conservative projection by industry consultancy Wood Mackenzie, which expects 5 billion cubic metres (BCM) of gas supply via the ‘Power of Russia’ pipeline in 2020, and thereafter expects a gradual ramp-up to the contracted 38 BCM by 2025 – seven years later than expected, the South China Morning Post reports.

China plans to deploy three more oil rigs in the South China Sea, a move analysts say demonstrates its determination to explore energy resources despite tensions with Vietnam and the Philippines. Two rigs, Nanhai 2 and Nanhai 5, will be deployed in waters east of Guangdong province by August 12, while Nanhai 4 will be towed to the Beibu Gulf close to the west coast of the Leizhou Peninsula in the southern-most part of Guangdong by July 15. The announcement came a day after talks between State Councilor Yang Jiechi and Vietnamese Foreign Minister Pham Binh Minh and Prime Minister Nguyen Tan Dung over escalating tensions in the South China Sea ended in deadlock. Foreign Ministry Spokeswoman Hua Chunying said the rigs will all be within the recognized coastal waters of Guangdong and Hainan provinces. Lu Jianren, Researcher of the China-ASEAN Research Institute at Guangxi University in Nanning, said China has been working in waters of its coast and near the Xisha Islands for years without controversy.

China exported a net 410,000 tons of refined products in May, equivalent to about 96,548 barrels per day, according to customs data. While this is a small amount by itself, it is the second month this year that China has been a net exporter of refined oil, something that had only happened three times before this year, the last time being as far back as January 2010. In the first five months of this year, China was a net importer of 1.47 million tons of refined fuels, equivalent to about 71,000 barrels per day (BPD), down 73.8% from last year. As net fuel imports have been slowing for some time, China could become a net exporter. China now has close to 13 million BPD of refining capacity available following the commissioning this year of two new plants with a combined capacity of 440,000 barrels. Given that implied demand was 9.71 million BPD in April, there is massive spare capacity in the refining sector. Net diesel exports stood at 76,676 BPD in the January-April period, just higher than the 75,151 barrels exported last year. China has been a steady exporter of petrol in recent years, but so far this year it has reduced shipments, with a net 109,152 BPD being exported, compared with 114,983 barrels over the first four months of last year.