Russian crude oil exports to China are still likely to show strong growth in 2011 and 2012, even though commercial negotiations between the two countries got off to a rocky start, according to a report by Platts.

Platts says direct pipeline deliveries began on schedule in January and have run smoothly since, delivering 300,000 barrels per day (b/d) of crude to oil-hungry China under a 20-year deal that starts this year.

“The ESPO pipeline remains a critical piece of the puzzle for both countries, as both Russia and China map out their future energy policies,” said Dave Ernsberger, Platts global director for oil before the Platts Moscow Oil Forum gathering of energy executives on Monday. “Their discussion over the exact level of payments is a serious one, but it is very much in the interests of both countries to work it out, and it looks very likely that they will,” Ernsberger said.

Russia’s Eastern Siberian Pacific Ocean (ESPO) crude, a stream first introduced in December 2009, pushed further onto the global oil stage early this year. Platts says total flows of ESPO crude to China have grown substantially this year under the agreement, as pipeline deliveries have added to occasional seaborne deliveries of the crude. As flows of Russian crude to China and the rest of the Asia Pacific region grow, the oil market is looking ever more closely at ESPO as a potential crude oil benchmark for the future.

“There will be a need for more pricing and benchmark development,” said Jorge Montepeque, Platts global director for markets reporting, also speaking at the Platts Moscow Oil Forum. “The two key ESPO stakeholders, Russia and China, would benefit from exploring regional pricing needs in more detail. Platts has extensive knowledge and long experience in price discovery processes and benchmark development and we are always ready to share that knowledge.”

The dispute between China and Russia arose earlier this year over an agreement signed in February 2009 between Transneft and Rosneft in Russia, and China National Petroleum Corp (CNPC) and the China Development Bank in China. Platts says CNPC wanted to change the transport fee set by the Russian government and used in the pricing formula, and it unilaterally reduced the price it paid for the ESPO crude supplies it has received since the start of the year.

Following a round of energy talks between Sechin and Chinese Vice Premier Wang Qishan in late May, CNPC paid about $77 million of the $100 million it owes Rosneft since January. Earlier this month, Platts reports Rosneft said that the two countries have agreed to leave the price formula for ESPO crude unchanged.