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Japan
intensifies lobbying for Russian
oil
By John Helmer
MOSCOW -
With a blaze of publicity, the Japanese government has
intensified its lobbying for a Kremlin decision in favor
of a new crude-oil pipeline to Nakhodka, on the Sea of
Japan. While Russian government reaction has been
politely positive, the silence from Russia's commercial
oil companies suggests that Tokyo is miscalculating its
effort, pitching financial incentives in the wrong
direction.
Japanese press reports, based on
official sources, have claimed that, during meetings
last weekend in Vladivostok between Russian Deputy Prime
Minister Victor Khristenko and Japanese Foreign Minister
Yukio Kawaguchi, Japan sweetened an earlier offer to
finance the Sea of Japan oil outlet with low-interest
loans of up to 900 billion yen (US$7.5 billion). "If the
project materializes," Kawaguchi said at a press
conference, "it will become one of the solid pillars of
mutual trust."
Russian sources close to Tokyo
told Asia Times Online that "after more than a decade of
aid, trade, and political talks, there remains a serious
lack of trust between Moscow and Tokyo. This has
produced inertia towards new projects, despite the
optimism of public declarations."
Russian
oil-industry sources told ATol that an increase in the
Japanese financing offer for the Nakhodka pipeline fails
to address its two greatest disadvantages in the
thinking of Kremlin officials. These sources said "the
first problem is that the terms of repayment would
require exclusive delivery of Russian oil to Japan until
the loans are repaid; the second is that there is
insufficient oil production in the East Siberian basin
to make the new pipeline cost-effective for at least the
next decade".
According to a report by
Moscow-based Alfa Bank - which is linked to the Tyumen
Oil Co - the Japanese offer tabled by Kawaguchi this
week includes "finance [for] the development of Eastern
Siberian reserves, should Russia agree on construction
of the Angarsk-Nakhodka branch before building a branch
to China".
Oil-company sources acknowledge that
foreign financing is a precondition for development of
the East Siberian basin. Until now, virtually all of the
growth in Russian oilfield output and exports has come
from upgrades of the West Siberian basin, and from
traditional sources in the Volga Urals basin. According
to estimates by the Russian oil companies, the West
Siberian basin has more than 170 billion barrels of oil
to be produced at peak capacity rates over the next 50
years. Proven reserves in East Siberia currently total 3
billion barrels, with potential recoverable reserves
estimated at 16.6 billion barrels. Cost-effectiveness
and profitability criteria tilt Russian production
planning toward the oilfields in the west, not the
east.
President Vladimir Putin hinted at these
issues when asked about the pipeline decision in a press
conference on June 20. "Angarsk-Nakhodka seems
preferable," he said, "from the standpoint that it
allows access to the market in the wide sense of word,
allows the export of energy raw materials to all the
countries of the region." But he also cautioned that
"the question is only whether it is economically valid.
The problem is that the filling this pipeline with oil
is still problematic. It depends on the results of
geological exploratory works in Eastern Siberia, and
specialists should calculate how much laying the
pipeline to Nakhodka will cost, whether this pipeline
will be have a full load and be economically justified,
and economically effective."
Current estimates
are for the Nakhodka pipeline to have a capacity of 50
million tons per annum (almost 1 million barrels per
day), at a cost of about $6 billion. The route between
Angarsk and Daqing, in China, is half the distance, and
a fraction of the price, with financing expected to come
from Chinese state debt to Russia. The Chinese route was
agreed between Putin and Chinese President Hu Jintao in
Moscow in May. This route also has the backing of
Transneft, the state-controlled pipeline monopoly. The
commercial Russian oil producers say their current
pipeline priority is a route from new Arctic oilfields
to Murmansk, in northwestern Russia, which would provide
access to consumers in Western Europe and the United
States.
"The pipeline stretch to China is much
more economically feasible," commented Alfa Bank. "It
can be built cheaper and faster and has a capacity that
can be filled with reserves currently available in
Eastern Siberia." An oil-company source added that "so
far, the Japanese government's lobbying campaign has
failed to attract support from the Russian oil giants".
(Copyright 2003 Asia Times Online Co, Ltd. All
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for information on our sales and syndication policies.)
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