Vladimir Shlyomin

P

resident Vladimir Putin is asking the Russian Government to hurry up with determining new routes of oil export shipments from Russia. “It is not the first year that the Government is unable to set priorities and, frankly, the question is overripe”, stated the president in his annual message to the Federal Assembly. He pointed out that “accomplishing national tasks, not interests of some companies, should serve as a guidepost for making necessary decisions”. At the same time Putin stopped short of giving specific orders and just listed existing projects to construct oil pipelines.

The oil pipeline from Siberia to the Far East is among major projects of transporting Russian hydrocarbons mentioned by the president. Its planned route has already been changed several times. At the beginning, plans called for laying the pipe from the town of Angarsk (the Irkutsk region) to the Daqing province (China). Later, the port of Nakhodka on the Pacific coast, from where oil can be brought to Japan by tankers, was chosen as a terminal point. Now Transneft JSC that specializes in pumping oil through pipelines is putting forward its own options.
Head of Transneft Semyon Vainshtok finds it optimal to construct a pipeline to Nakhodka with the total length of 4,500 km and estimated cost of $12B. Transneft hopes to finish preparing project documents and feasibility study in the first quarter of 2005. For this purpose as well as for exploration the company is planning to allocate $260M.
The proposed route starts not in Angarsk but near Taishet and that would allow to make the pipeline somewhat shorter. Its terminal is to be the Perevoznaya Bay (close to Nakhodka) and not the port of Nakhodka as was assumed at early stages of planning. According to designers, the route will go partially through the corridor of the Baikal-Amur Trunk Railroad (BAM) and in part along the Trans-Siberian Trunk Railroad.
In the opinion of Semyon Vainshtok, the project can be implemented in stages using BAM for transporting oil. "In the beginning, it makes sense to build a port in the Perevoznya Bay and lay a thousand km-long pipeline from Taishet that should end up at a loading rack for transshipping oil to tank cars", he says. As soon as the combined transport scheme starts to operate, works to construct another 1,100 km of the pipeline will be resumed while one more loading rack will be built. "As a result, 2,100 km of the pipeline as well as the extension of the railroad section will be in operation then", explains Vainshtok. Transneft and Russian Railroads JSC have already been coordinating their joint efforts to implement this scheme.
In fact, Transneft stopped considering the so-called ‘southern project’ of constructing an oil pipeline to China’s Daqing province that was initiated by YUKOS. The formal reason for the refusal was the fact that this route would come across the wild life reserve near the Lake of Baikal. By the way, potentially the northern route can affect even several natural reserves. That is why works will start only after an ecological examination is completed. According to the head of Transneft, this examination will take place in early 2005.
Russian Railroads JSC likes Transneft’s new idea. And it is not surprising: today, the poorly loaded BAM is losing over $300,000 in profit a day. It is worth recalling that its total length amounts to 4,300 km and that it goes from Taishet to the Pacific port of Sovetskaya Gavan. The freight flow of the Trunk is estimated at 4 million tons while its throughput capacity equals 15 million tons of freight.
"The option put forward by oilmen will ensure shipping 10 million tons of freight annually even in the first years of the project’s implementation", explains Salman Babaev, the vice president of Russian Railroads JSC. "And for the next seven years while the pipeline will be under construction, oil shipments will bring considerable earnings to the company", he says. The working group formed by the partner companies should calculate the economics of oil transportation. "If it discovers that with existing tariffs transporting operations will be unprofitable, Russian Railroads JSC will reduce its rates", promises Babayev. However, the final say will still belong to the Russian government, since railroad tariffs are regulated in Russia by state authorities.
Analyst from the Argus Oil-and-Gas Agency Mikhail Perfilov thinks that the idea of constructing the pipeline in stages is "reasonable and good". In his words, its realization "will contribute to consolidation of Russian oil positions in the market of the Asia-Pacific region countries".
The company’s grand plans can be prevented only by the Sate, which owns 100% of common shares of Transneft. The agency for regulating federal property intends to send a directive on the amount of dividends to the board of directors of Transneft. Dividend payments are expected to increase from $45M to $116M. *This will block the development of Transneft", says Semyon Vainshtok. "We will be able to pay out this amount but it will result in reduced rates of increasing the throughput capacity of Russia’s pipelines", he adds.
Transneft JSC invests in modernizing production capacities up to $1B annually, insists Vainshtok. In his words, these funds "are going to do diagnostics, technical re-equipment and overhaul". Investments allow to maintain the necessary level of reliability and safety of operating pipelines. Semeyon Vainshtok points out that the company succeeded in reducing the accident rate down to 0.04 accident per one thousand km and that corresponds to the "world index".
Constructing the first section of the oil pipeline to the Pacific coast will take between 18 and 20 months after a final decision is made and works are started. Formally, the company should wait for what the government will have to say. But, to all appearances, the scale is inclining in favor of the combined oil export scheme that Transneft is proposing.


Reference:
High officials of the Russian government state: Russia will increase oil export shipments so as to stabilize world prices. Vice Prime Minister Alexander Zhukov stressed that "Russian companies are also interested in it because market conditions for oil are good" and markets are waiting for Russian oil. According to finance minister Alexei Kudrin, additional supplies will amount up to 500,000 barrels of oil a day.
These statements are confirmed by data from Russia’s Ministry of Industry and Energy on actual dynamics of export shipments. In the first quarter of 2004 export shipments of Russian oil beyond the CIS equaled 43.24 million tons (3.46 million barrels a day). It exceeded the last year level by almost 25%. Shipments to the CIS and Baltic countries remained on the previous level (9.78 million tons of oil against 9.39 million tons in 2003). Under the schedule for the second quarter, oil export shipments will go up to 54.8 million tons, including 10 million tons of shipments to the CIS and Baltic countries.
Transneft JSC is planning to export 240 million tons of oil through the system of the trunk pipeline transport or by 15% more as compared with the level of 2003.
At the same time, according to the Minister of Industry and Energy Viktor Khristenko, "the country’s pipeline system is loaded almost 100%" . "Our task is both to extend and renovate the pipeline systems", the minister said.