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Oil Goes East
January 11, 2007 14:38

Last year appeared to be turning for oil&gas industry of Russia – construction of the export pipeline towards the countries of the Asia-Pacific Region was commenced at last. At that all the country witnessed how easy the pipeline route was carried 40km, which later transformed into 400km, from the original one. The far-reaching decision was made at the meeting held in Tomsk on 26th of April: that is when Russian president declared the Eastern pipeline must go beyond the water supply protective zone of the Baikal, as the lake, which is the world biggest fresh water reservoir, is 800 metres distant from the originally planned route. Transneft, the company operating the project, assured the government that the latest technologies capable to minimize the risk of the lake pollution would be used within the course of the construction. However, the company failed to persuade the local people, who kept on protesting against the pipeline. Besides, scientists and ecologists worried about the fact that the pipeline was to cross earthquake zones of Buryatia. Having asked, if transfer of the pipeline was possible, the head of the country drew a line, representing a new route, on the map slightly further to the north. The transfer later emerged to go 40 kilometres north from the lake.

Nevertheless, Transneft survived the shake and two days after the meeting started the constructing works in the Irkutsk Region. However, a month later the management of the company got to know the 40km transfer wasn’t the last: mountains stood on the way of the route approved at the meeting, so the pipeline had to be moved 360 km more. Despite all the changes implying 537km extension of the route and necessity to built additional 300km of motor roads Transneft promised to meet the deadline.

To finance the project Transneft is planning to actively use its own funds along with loan money. According to the data of November 13 the construction of the first stage of the pipeline Eastern Siberia – the Pacific Ocean is financed by Transneft for 49.2bn rubles ($1.87bn). Primarily the company determined the value of the project equal to $11.5bn but now the cost is being reconsidered.

Notwithstanding the shock speed of construction and well-run funding, the problem of pipeline fill remains unsolved. The president of Transneft says, the current capacity of Eastern Siberia – the Pacific Ocean line considerably exceeds export potential of Russian oil industry, due to Russian oil companies prefer the domestic market to foreign ones at the moment. The authorities believe that introduction of tax holiday for new oil reservoirs in Eastern Siberia will be conductive to pipeline fill. This measure is expected to increase oil production in the Region up to 45mn tons by 2015.

Tax holiday will be fixed from the period of 10 (production license) to 15 years (exploration license). Although, for the present Russian companies dealing with oil production come short of expectations, as they don’t meet the rate of development scheduled earlier, which put at stake the guarantee that the pipeline will be filled enough.

After completing the first stage of the project at the end of 2008 the designed capacity is to make up 30mn tons a year; the finished second stage in 2015 will demonstrate the increase of capacity up to 80mn tons a year. Russia has enough estimated oil reserves capable to give 30mn tons of oil for export a year, but firstly these reserves must be brought into production.




Olga Pletneva

Tags: Russian oil Transneft    

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