Russian state oil company Rosneft has signed one of the biggest oil deals ever, a $270 billion agreement to double oil supplies to China, Reuters reports.
The deal, which includes upfront prepayments of $60 to $70 billion, calls for the company to supply China with 300,000 barrels per day (bpd) for 25 years starting in the second half of the decade, in addition to the current 300,000 bpd it sells to the country.
"The estimate of the sum of the contract in today's market prices is absolutely unprecedented - $270 billion," said Russian President Vladimir Putin.
The increased sales to China reflect a shift by the Russian company toward Asian customers and away from Europe. The new oil will come partly from new streams of crude oil from East Siberia, simplifying infrastructure issues for Rosneft, one source said.
Analysts said the deal helps Rosneft improve its balance sheet to finance new projects after it took on significant debt for the acquisition of TNK-BP.
"If confirmed, this would be a transformational event for the company's balance sheet: Rosneft could even potentially be able to show a net cash position, though working capital would be negative," J.P. Morgan analysts wrote.
"The prepayment could minimize financing risks for the leveraged state-controlled oil company."