On Tuesday Rosneft President Igor Sechin Tuesday met Chinese Vice Premier Wang Qishan to discuss the terms of an intergovernmental agreement to build and operate a refining and petrochemical complex in China's Tianjin, the state-owned Russian oil company said in a statement Wednesday. 

 

"The document will set down conditions for partnership in the construction and operation of the refining and petrochemicals facility so that the target internal rate of return can be achieved on this project," Rosneft said. 

 

To support the economics of the project, the Chinese government will grant the facility the right to import crude independently, as well as to export and sell oil products on the Chinese market independently, the Rosneft statement said. 

 

Rosneft and China's CNPC originally signed an agreement in September 2010 to conduct a front-end engineering design study for a 260,000 b/d refinery in Tianjin, and held a ceremony to mark the start of the construction. 

 

Construction had been expected to take place by 2015, at a cost of $5 billion, with the partners also planning to build around 500 service stations in northern China. 

 

Later, however, the project stalled, with questions raised over its economic viability. 

 

In June, Rosneft deputy CEO for refining Igor Pavlov said that the two partners were looking into ways to make the Tianjin project more economically attractive. A source familiar with the talks told Platts subsequently that the partners had considered including a petrochemical plant in the planned refining complex in order to improve the economics of the project. 

 

In September, Russian President Vladimir Putin said the Chinese authorities' willingness to grant preferential rights to the project represented the first time they had done so for a development involving foreign capital. 

 

The decision by China's government "drastically raises the efficiency of the facility's operations," Sechin said at the time.

 

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