Pipeliners

February 28, 2005. By Michael Teagarden and Eduard Gismatullin Bloomberg - Oil pipeline monopoly Transneft said it may cost $2.2 billion to build a link from northern Russia to the Arctic Ocean to help companies such as Total increase exports. Russia's oil output has surged about 50 percent since 1999, straining the capacity of pipelines, especially in regions such as Timan-Pechora, a northern oil field being developed by LUKoil. Total, Europe's largest refiner, said insufficient export capacity was stalling investment at its northern Kharyaga field. "Transneft thinks it is feasible to transport Timan-Pechora oil along the route from Kharyaga" to the Pechora Sea port of Indiga, where an oil terminal with the capacity of 480,000 barrels per day could be built, the company said in a statement Friday. Transneft earlier looked at plans to build a pipeline from the town of Surgut in western Siberia to Indiga that had a price tag of $6 billion, Transneft deputy chief executive Sergei Grigoryev said Friday in a telephone interview. The company will not decide on the Kharyaga-Indiga link until it has determined whether oil producers would support the new pipeline, Grigoryev said. The line from Kharyaga would be able to export almost all of Timan-Pechora's oil output, clearing space in existing pipelines for crude from western Siberia, Transneft chief executive Semyon Vainshtok has said. LUKoil proposed that Transneft build the pipeline from Kharyaga, both Vainshtok and Grigoryev said. "Of course, it would be better for us to use infrastructure that will be built" by Transneft, Leonid Fedun, a deputy chief executive at LUKoil, said earlier this month. "The question is when this pipeline will be built." LUKoil is upgrading the Varandei oil port in the Pechora Sea to reach an annual capacity of 240,000 bpd in 2007, Fedun said. LUKoil plans to export about 36,000 bpd of crude through Varandei this year. LUKoil and ConocoPhillips have established a joint venture, Rusco, to tap Timan-Pechora's fields and ship crude to the United States via Varandei. The venture's output is expected to reach 200,000 bpd by 2008, LUKoil said. LUKoil may trim its plan for Varandei expansion if Indiga is built, Fedun said. The port can be expanded to a capacity of between 100,000 bpd and 120,000 bpd, down from the original plan. Transneft planned to increase the capacity of its Baltic oil pipeline, which links western Siberia to the port of Primorsk near St. Petersburg, to the planned maximum of 60 million tons per year in the first half of next year, Transneft said Friday. The expansion was earlier planned by the end of 2005. A feasibility study for a pipeline to ship oil from eastern Siberia to the country's Pacific Coast should be completed by June 30, with construction set to begin this year, Transneft said.