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Russia's great pipeline
race
By John Helmer
MOSCOW -
The Kremlin must decide in the next few weeks whether
President Vladimir Putin's relations with the Chinese
leadership are strong enough to justify a multi-billion
dollar investment in an overland pipeline for Russian
crude oil deliveries to China.
At the same time,
in the northwest of Russia, Putin faces a similar choice
of whether to back a port plan to ship oil directly to
the United States, or to keep his oil market options
more flexible and uncommitted.
Russia's
state-owned oil pipeline monopoly Transneft told Asia
Times Online that it was seeking Kremlin endorsement in
the next few weeks for its ambitious pipeline plan
across eastern Siberia to the Pacific. Its rival is
Yukos, the second largest of Russia's oil producers,
which wants to pipe its oil southwards to
China.
According to Transneft, it was not in
Russia's strategic interest to tie large oil
transportation investments to single market
destinations, no matter how solid political relations
with China looked at the moment. Its Nakhodka pipeline,
Transneft argues, would allow greater flexibility for
shipping the oil to whichever Pacific market demanded.
Transneft is backed by Russian tanker companies
Sovcomflot and Primorsk Shipping Corporation, already
bidding to deliver crude that will start flowing next
year from the Sakhalin Island offshore fields to De
Kastri, on the Okhotsk seacoast.
Sergei
Grigoriev, a senior Transneft executive, said that he
expected a government decision on the Angarsk-Nakhodka
pipeline by the end of the year. He said that the cost
of the 3,000 kilometer line would be about US$4.5
billion, with a design capacity of 50 million tonnes per
year (900,000 bpd). The plan calls for the pipeline to
have an oil-loading berth at Perevoznaya Buhta, with
deep-water capacity for tankers to load up to 300,000
tonnes.
"Although the project is more expensive
than that of Yukos'," Grigoriev said, "it will enable
Russian oil companies to export oil to the US and Asia,
and at the same time will be of interest to other oil
companies. The projected pipeline will enable LUKoil to
export its oil from western Siberia and Yukos and Tyumen
Oil Company from eastern Siberia."
Yukos sources,
meanwhile, told Asia Times Online that its proposed
2,400 kilometer pipeline was likely to cost $1.7
billion, and would lift the company's shipments of about
27,000 bpd at present (by rail) to 540,000 bpd. The
Russian and Chinese governments first announced the
project in July 2001, but wariness on both sides has
slowed down the planning process. Just over a month ago,
Yukos agreed with the China National Petroleum
Corporation (CNPC) that the latter will buy 20 million
tonnes of Yukos crude per year (360,000 bpd) by 2005,
and 30 million tonnes per year (540,000 bpd) by 2010.
CNPC will also lend Yukos half the cost of the
construction of the pipeline on the Russian
side.
At a meeting last week in Shanghai, Prime
Ministers Mikhail Kasyanov and Zhu Rongji announced that
they wanted to speed up this project.
Critics of
the Yukos plan claim that, despite oil field output
growth this year to date of 18 percent, the company may
not be able to meet its delivery commitment to the
Chinese. "Most likely the original figures for supplies
to China will become smaller as time passes," a Moscow
oil analyst said. This year, Yukos will deliver about
1.5 million tonnes of oil to China on the rail route
(27,000 bpd). The total is rising steadily, and next
year it is expected to reach 2 million tonnes (36,000
bpd).
Yukos spokesman Hugo Erikssen said that
the company "constantly increases oil production and no
doubt will have enough oil for delivery to China".
Overall, Yukos output at present is 1.2 million bpd.
Yukos wants to build support for its China pipeline from
other Russian oil majors. Erikssen said that the project
"will be open for participation of other oil companies
interested in developing exports to China". Yukos, he
added, also hoped to mollify Transneft's objections by
persuading it to act as pipeline
operator.
Transneft has also told the Kremlin
that it had serious doubts about direct-shipping plans
announced by LUKoil, Russia's leading oil producer, to
direct its crude to the United States from a proposed
new super-tanker terminal at Murmansk port, on the
Barents Sea, in northwestern Russia.
According to
Grigoriev, this project would rival Transneft's plan,
already under way, to lay a second pipeline to Primorsk,
on the Baltic Sea, which will add 6 million tons of
export capacity, and become operational next
year.
Transneft did not favor a terminal intended
for the US, he said. "It is not reasonable to limit
projects to particular markets. On the contrary,
Transneft favors diversification of exports."
The issue has aroused considerable debate within
Russia. Valery Nesterov, an analyst of IK Trojka-Dialog,
comments, "From the economic point of view, the ...
[Chinese] project is more promising. It is cheaper,
smaller and easier to fill in, it will be built and
bring money faster. From the geopolitical point of view,
the Transneft project is more attractive, it provides a
chance to orient at a lot of consumers. But it is rather
expensive, the terms of construction are not clear, and
it is not clear whether it will be possible to guarantee
full loading of that big pipe. Trading with China is too
risky. We have no experience of long-term economic
relations on pipelines, and, besides, it is hardly
possible to predict the political future of China for
the next 10 years."
And Vladimir Lukashov,
executive secretary for the Russian investments
interfactional deputy association, comments, "The
balance will be tipped by politics, in particular, the
character of relations between Russia and China. I think
that it is too dangerous to give this kind of a pipe
into other hands. In sheer economical terms, it
[Transneft's] would be the best way. It would allow
Russia to redirect on her own the fuel flows depending
on the situation and its own economic interests."
(©2002 Asia Times Online Co, Ltd. All rights
reserved. Please contact content@atimes.com
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