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Friday, April 29, 2005

First Stage of Russia-Asia Oil Pipeline to Be Completed by 2008

Image by MosNews.com28.04.2005 12:25 MSK MosNews - Russian pipeline monopoly Transneft has been ordered to complete construction of the first stage of the Russia-Asia oil pipeline by mid-2008, the Russian Industry and Energy Ministry said on Wednesday, April 27. The first stage of the proposed 4,200 km (2,625 mile) pipeline, whose construction was approved by the government in December, will run from Irkutsk region in Siberia to the town of Skovorodino in the Amur region or mid-way to the Pacific. Oil will be taken from Skovorodino by rail to China and the Pacific coast, while the pipeline will be extended to both directions at later stages. "I order the approval of a Transneft proposal on the stages of construction of the Eastern Siberia-Pacific Ocean pipeline with a total capacity of up to 80 million tons per year (1.6 million barrels per day)," Russia's Industry and Energy Minister Viktor Khristenko said in the decree, quoted by Reuters. According to the decree, the first stage of the project will be financed by loans to Transneft, which has just raised a $250 million loan via British bank Barclays to expand its key Baltic export port of Primorsk. The costs of the project are much higher, however, and Russia has already suggested that financing, at least in terms of credits, should come from Japan which is very interested in Russian crude. Transneft has said the first shipments via the pipeline would rely on crude from West Siberia as the region is already connected to Irkutsk, but that it would need more crude from East Siberia to fill the pipeline to capacity. Interfax quoted the deputy head of the federal Subsoil Resource Agency Petr Sadovnik as saying on Wednesday the maximum potential of East Siberia was 50 to 60 million tons of oil per year and not enough to fill the Pacific pipeline. Sadovnik said the energy ministry had ordered an analysis of the resource base at fields in Western Siberia to boost supplies via the planned pipeline. Energy analysts say untapped fields in East Siberia may contain as much oil as West Siberia, where the Soviet Union and then Russia have produced the bulk of the crude since the 1970s. As MosNews reported, Russia has been considering the construction of an Asian pipeline for a long time. The China route, going to Dajing was supported by Yukos Oil Company which already exported a major part of its crude to China. The Japanese-backed route to the Pacific Ocean port of Nakhodka was supported by Transneft which owns the vast majority of pipelines on the territory of Russia. After more than a year of consideration the Russian government announced that it chose the Nakhodka route, but conceded that a branch to the Chinese border may be built from Skovorodino. The total cost of construction of the pipeline is now estimated at $11.5 billion.


MOSCOW, April 28 (RIA Novosti) - Industry and Energy Minister Viktor Khristenko signed off on building the Eastern Oil Pipeline, a route with the capacity to transport 30 million metric tons of oil per year. The pipeline is intended to pump oil from deposits in Western Siberia and will extend nearly to China. However, government officials did not mention if Russian oil would also be delivered to Japan, Gazeta.Ru reported. According to reports Wednesday, Khristenko signed a decree defining the stages for the construction of the pipeline from Taishet in the Irkutsk region to Skovorodino in the Amur region, just 60 km from the Russian-Chinese border. Transneft will build the first section until mid-2008. After that, the pipeline will be extended to Perevoznaya Bay in the Primorye Territory. Aton Brokerage's Zarko Stefanovski says that the project's initially stated price of $16 billion is unjustifiably high. Analysts from Antanta Kapital believe that the new guideline of $11.5 billion, also being used by officials at the Industry and Energy Ministry, is a sort of a compromised version. "However, it is necessary to take into account the fact that the estimates of expenses are frequently exceeded in the process of construction, he said." Experts estimate the construction of the first section will require about a half of the $11.5 billion sum. Transneft has sent the government a list of customs and tax privileges, with which the company is seeking to cut the investment recoupment period. The company's press service said that "the issue of privileges has not been resolved yet." The first section of the pipeline will pump oil from the deposits in western Siberia. The pipeline could be used for oil exports, but it would be necessary either to extend the pipeline to China or to further deliver crude via railroad. The government is so far reticent about the fate of the pipeline's second leg, which is expected to reach the Pacific Ocean and make deliveries to Japan and South Korea profitable. Analysts doubt that the pipeline will be extended to Perevoznaya Bay. The fall of oil prices may make oil deliveries via this pipeline unprofitable while oil in Eastern Siberia, expected to be transported via the pipeline, still has to be further explored, Meaning, Japan may never receive Russian oil.

Thursday, April 21, 2005

Japanese Told China to Get Pipeline First

21.04.2005 Reuters, Bloomberg, MT - Russia will likely build a pipeline to transport oil to China from Siberia before completing a pipeline to Japan, Japanese media reported Wednesday, citing Industry and Energy Minister Viktor Khristenko. Russia will first build a pipeline from eastern Siberia to Skovorodino, the midway point of the proposed 4,200 -kilometer pipeline to the Pacific coast, Jiji news agency quoted Khristenko as telling a group of Japanese reporters in Moscow. Russia will then build an oil terminal in Skovorodino and send oil to China through a branch pipeline, said Khristenko, who is due to visit Tokyo on Thursday and Friday. That indicated the branch pipeline would be completed before the entire pipeline to a port near Nakhodka, where the oil would be shipped to Japan, the report said. China and Japan have been competing over routes for the pipeline, which is expected to cost $5 billion to $8 billion. Khristenko is scheduled to meet Japanese Economy, Trade and Industry Minister Shoichi Nakagawa on Thursday to discuss issues including the pipeline. In a separate statement issued Wednesday, Khristenko said that Russia would at first have to rely on oil pumped in western Siberia to fill the Pacific pipeline, as eastern fields will not be ready in time. The government will auction rights to untapped oil fields in eastern Siberia while it is building the pipeline, he said. "Access to the Pacific coast is of principal importance for Russia," Khristenko said in the statement. "In any case, the pipeline route will be defined by the location of oil reserves, rather than by the location of the sea." The pipeline project and its capacity will be amended, depending on exploration results in eastern Siberia, he said. It is difficult to estimate eastern Siberia's recoverable reserves, he said. The planned pipeline, which will be owned and operated by state-owned Transneft, expects to initially ship 600,000 barrels of oil per day.


MOSCOW, April 20 (RIA Novosti) - Viktor Khristenko, Russian Minister of Industries and Energy, is expected to discuss the Siberia-Pacific oil pipeline project with Japanese government officials and corporate executives during his two-day visit to Japan, beginning tomorrow. He is scheduled to meet, among others, with his Japanese opposite number, Soichi Nakagawa, the ministry's press office has told RIA. The central event of Khristenko's visit will be the 7th session of the Russo-Japanese intergovernmental commission for trade and economic affairs, which the minister co-chairs. The Siberia-Pacific pipeline project will, indeed, be a prominent issue on the session's agenda, but not the only one, Khristenko said to reporters ahead of his Far Eastern trip. He pointed out that trade turnover between the two countries had grown dramatically in recent years, exceeding all expectations. According to his statistics, bilateral trade reached a record-high 8,849,400,000 dollars in 2004, marking a 48.4 percent increase on the previous year. Russian imports amounted to $5,694,600,000 while exports, to $3,154,800,000. Whilst in Japan, Khristenko is also expected to meet with top management of the corporations Toyota Motor and Nissan Motor and to visit their head offices. Speaking of those meetings, the minister said several joint projects in the automotive industry would be discussed.

Wednesday, April 20, 2005

Oil Pipeline May Go to China, Minister Says

Oil Pipeline May Go to China, Minister Says20.04.2005 17:39 FC Info News - Russian Industry and Energy Minister Viktor Khristenko does not rule out that an oil pipeline may be laid to China.The project of a pipeline from East Siberia to the Pacific envisages the construction of an oil loading rack in Skovorodino and another one in the bay of Perevoznaya, allowing "railway oil shipments from Skovorodino to the coast," he said, adding that an oil terminal was also to be built there. "But oil can be also delivered to China by pipeline," he pointed out.


MOSCOW, April 20. (RIA Novosti) - Russia has launched consultations with investors on financing construction of an oil pipeline to connect East Siberia with the Pacific, Russian Industry and Energy Minister Viktor Khristenko has announced. "Consultations are underway with financial institutions that can contribute to the project in some way," he told journalists ahead of his visit to Japan. He did not rule out that Japanese banks could take part in financing the Eastern pipeline. At present there are opportunities to take loans on different markets, the minister emphasized. "The world has enough money for us to find creditors. The important thing is to find fairly cheap money for a fairly long term," he pointed out. Mr. Khristenko recalled that the project would be carried out in stages, so the funds would also be attracted in parts. "The idea of dividing the project into stages implies that fulfillment of some of them may start bringing profit, while new fields are explored and develop to increase the pipeline's load," he said. It is crucial to lay the pipeline to the Pacific coast to diversify Russian energy supplies, the minister stressed. He does not see "either moral or political threat in the fact that the oil, now shipped to China by railway in increasing amounts, will be carried by the pipe, when it is ready," he said. At the end of 2004 Russian Prime Minister Mikhail Fradkov signed a resolution on construction of a new pipeline from East Siberia to the Pacific ocean. It will go from Taishet to Skovorodino and on to the bay of Perevoznaya. Its total capacity is projected at up to 80 million tons of oil annually. The pipeline will carry oil to the Asian-Pacific countries. The cost of the project is estimated at $11.5 billion.

Friday, April 15, 2005

Transneft signs agreement for co-loan

RBC, 15.04.2005, Moscow 13:22:22.Transneft has signed an agreement with Barclays Bank on a co-loan worth USD250m for a term of 3 years. The loan will be discharged in three payments after a two-year grade period expires. The borrowing cost is set at 115 basis points in addition to the LIBOR dollar rate for the whole period of the loan, which is currently the lowest cost among corporate unsecured loans on the Russian stock market. A group of 19 banks was formed and assumed obligations to grant a credit worth a total of USD400m. Taking the favorable demand-and-supply situation into account, Transneft decided to raise USD50m more from the initial target of USD200m. According to Transneft president Semen Vainshtok, the funds raised will be appropriated to finance third-stage construction of the Baltic Pipeline System, and re-finance part of the company's debts arising from the completed stages of the Baltic Pipeline System project. Transneft proposes to close the Baltic pipeline expansion project in the first quarter of 2006.

Transneft president on construction of Burgas-Alexandroupolis pipeline

RBC, 15.04.2005, Moscow 14:05:19.Transneft has praised the project for construction of the Burgas-Alexandroupolis pipeline, Transneft President Semyon Vainshtok has told journalists at a press conference in Moscow. He emphasized that Transneft praised the diversification of the pipeline system as it has a positive effect on the market in general. As for the construction of the Burgas-Alexandroupolis pipeline, its implementation depends on oil companies; providing guarantees on oil supplies, which are to be transported via the pipeline, he believes. Vianshtok also said that Transneft is unlikely to participate in the project as it has plenty of its own new projects. But if Transneft is invited to operate the project, it could agree on the issue, he added.


04-15-2005 MOSCOW (Igor Tomberg, candidate of economics and leading researcher at the Institute of World Economic and Political Studies, Russian Academy of Sciences, for RIA Novosti) - On April 13, the governments of Russia, Bulgaria and Greece signed a memorandum of cooperation in the construction of an oil pipeline. This may end the difficult 13-year talks on the construction of the pipeline from Burgas (Bulgaria) to Alexandroupolis (Greece), bypassing the Bosporus and the Dardanelles. The talks lasted so long that the media started describing them as "long-suffering." After its commissioning, oil will be delivered by sea from Russia's port of Novorossiisk to Burgas and onward through the new pipeline to Alexandroupolis in Greece and the European, U.S. and Asia Pacific markets. The project was initiated by Russian and Greek companies, and the signing of the memorandum will give a political start to the talks on its construction. The group of Russian initiators includes LUKoil, TNK-BP, Transneft, Stroitransgaz and Sovcomflot. Experts of the working group say industry will save about $1 billion owing to cheaper transport costs. The pipe will be 280km long, and its throughput capacity is to be 35 million metric tons a year (it could be increased to 50 million). The tentative cost of the project (include the price of steel) is about $783 million. The signing of the memorandum does not mean a green light for investment and construction. Oil experts say there are many financial and technical questions about the design, and the oil companies have not pledged to send oil by the new pipe. The main goal of the project is to divert a part of oil traffic from the Bosporus and Dardanelles, through which Russian tankers deliver oil to southern Europe. Turkey has recently imposed stricter rules on ships passing through the straits, which have resulted in regular tanker jams. Tankers spend an average of 20-25 days in the straits, which affects the suppliers' profits. Judging by the map, there are many bypass routes, and the most advanced of them is from Baku (Azerbaijan) to Ceyhan (Turkey). But this route is not acceptable to Russia for economic (expensive) and political considerations. The best route economically, politically and even for religious reasons (Bulgaria and Greece are Orthodox nations) is from Burgas to Alexandroupolis. The new corridor would also suit Russia's partners, as it would bring southern Europe closer to the international oil markets and boost the fuel and energy sectors in the Balekans. Theodoros Roussopoulos, a Greek government spokesman, said recently that oil transportation cooperation with Russia and Bulgaria would have a big [positive] effect and promote "the common goal of regional development and geostrategic cooperation." But there are no guarantees that the oil companies will provide their output to the new pipe, though they keep complaining about the shortage of export pipelines. Moreover, there will be tough competition with other projects. The enlargement of the Caspian Pipeline Consortium (CPC), by which ChevronTexaco delivers oil from Tengiz in Kazakhstan to Novorossiisk, has been put into question. After buying Unocal, which owned a 8.9% stake in the Baku-Ceyhan project, ChevronTexaco decided to redirect 6-8 million tons a year from the Kazakh field to Ceyhan in 2006. Ukraine is again talking about the need to use the Odessa-Brody pipe for the transportation of Caspian oil to Europe (as of now, Russian oil companies use it to export their output via Odessa). Russia rejected Turkey's offer of building a pipeline between Samsun on the Black Sea and Ceyhan on the Mediterranean, fearing that the construction and use of the pipeline would increase transportation costs and rival the routes across Russia. Turkey argues that the oil companies would have to spend more anyway because of delays in transit through the straits. So far, Turkey has used the straits as an instrument of pressure on Russia, introducing limits on the transit of tankers from Novorossiisk. The construction of the new pipe bypassing the Bosphorus will force Ankara and several other parties to make concessions. The Burgas-Alexandroupolis pipe will provide additional aces for the Russian government's oil and gas talks with Ukraine. Experts think that the memorandum was signed ahead of time in view of the first Moscow visit by Ukrainian Prime Minister Yulia Timoshenko this week, which has now been cancelled.

Thursday, April 14, 2005

Yukos Subsidiary to Sell Property - Paper

Photo: AFP14.04.2005 MosNews - The Sakhaneftegaz oil company, which belongs to Yukos, has decided to sell an unfinished pipeline to Surgutneftegaz. The pipeline stretches from the Talakan oil field in the Amur region to a terminal on the Lena river, the Vedomosti newspaper wrote on Thursday. The company has also decided to sell two oil wells at Talakan, roads and several other facilities, the company's vice president, Igor Chikachev, was quoted by the paper as saying. The pipeline is 110 kilometers long. It now costs about $44 million, all the company's property at the oil field costs $81 million. The pipeline is due to start operating in the summer. Sakhaneftegaz subsidiary Lenaneftegaz is also set to make a decision about the sale of some assets. It also owns oil wells at the Talakan field, Chikachev said. However, experts quoted by the paper said those deals will not be concluded until Yukos' assets are unfrozen.

Wednesday, April 13, 2005

Trans-Balkan Pipeline Gets Green Light

By Nevyana Hadjiyska
The Associated Press

Khristenko posing left of Bulgarian Prime Minister Simeon Saxcoburggotski.

SOFIA, Bulgaria -- Bulgaria, Greece and Russia signed a 522 million euro ($677 million) agreement Tuesday that opens the way for the construction of a privately funded trans-Balkan oil pipeline that will bypass Turkey's busy Bosporus strait.The deal was signed by the development ministers of Bulgaria and Greece, Valentin Tserovski and Dimitris Sioufas, and Russia's Industry and Energy Minister Viktor Khristenko. Under the long-delayed deal, a 285-kilometer pipeline will link Bulgaria's port of Burgas to Greece's Alexandroupolis on the Aegean Sea, a link that its sponsors hope will provide a faster, safer and cheaper alternative to carrying shiploads of oil through the Bosporus. Tserovski, however, indicated that original estimates to have the pipeline completed by 2007 were overly optimistic. "I'm convinced that the project can be fulfilled in the next three or four years," he told a news conference without elaboration. Initial talks on building the pipeline began in 1993 but were delayed because of disagreements over its cost, ownership and feasibility. The officials said the project would be financed by companies interested in running and exploiting the pipeline and not the three governments. TNK-BP is heading the project and other partners are to include Greece's Hellenic Petroleum, U.S. Cambridge Energy Research Associates, LUKoil and Rosneft, and Bulgaria's Technoexportstroy. Tserovski said that an "international project company" would soon be established to "offer the options for structuring and financing the project." Russia exports about a third of its oil production through the Black Sea and the pipeline will allow it to bypass the crowded and dangerous Bosporus in Turkey. The pipeline will have a capacity of 700,000 barrels per day. The planned annual capacity will be 15 million tons once the first stage of construction is finished, 24 million tons after completion of the second stage and 35 million tons on final completion with an option to expand it to 50 million tons.

Gazprom's pipeline ruptures in Siberia

13 Apr 20 0340 gmt RIA news agency - MoscowGazprom's pipeline ruptures in Siberia Text of report by Russian news agency RIA
Tyumen, 13 April: A rupture on the Urengoy-Surgut-Chelyabinsk main gas pipeline occurred in Tyumen Region on Tuesday [12 April], the public relations department of the Tyumen Region main directorate for civil defence and emergencies told RIA.
The pipeline rupture followed by a fire happened in Tyumen Region's Isetskiy District. The 1,420-mm pipeline operating under pressure of 66 atmospheres is owned by Surgutgazprom.
Eighty people were working at the site of the accident. Maintenance team is now fixing the pipeline. The transportation of gas continues using a reserve string. No casualties or damage to the environment have been reported, the public relations officer said.

Transneft to float bonds to finance construction of oil pipeline

13.04.2005 SKRIN - News -
Transneft JSC plans to float bonds to finance construction of East Siberia - Pacific Ocean oil pipeline,

Cbonds reported with reference to company's President Semen Vaynshtok.

Transneft seeking credit from Barclays Bank

RBC, 13.04.2005, Moscow 14:59:35.Transneft is poised to sign an agreement for a co-loan worth USD250m with the British Barclays Bank, the press service of the Russian transportation company has reported. The loan will be used to finance a project aiming at enhancing the capacity of the Baltic Pipeline System to 60m tons a year. The Baltic Pipeline System is meant to export oil to US and European markets. Transneft is planning to complete the Baltic Pipeline System project within a year, in the first quarter of 2006. Before this deadline, the company proposes to make 145 kilometers of linear pipeline portions operative, build another oil transfer pumping station, and upgrade eight more, and extend the special oil sea port of Primorsk.

Tuesday, April 12, 2005


MOSCOW/ATHENS, April 12 (RIA Novosti correspondent) - Russia, Greece and Bulgaria on Tuesday will sign a memorandum on the construction of an oil pipeline from the Black Sea port of Burgas (Bulgaria) to the Mediterranean port of Alexandroupolis (Greece). Russian Minister of Industry and Energy Viktor Khristenko believes that the signing of the memorandum will give a political start to the negotiations on the construction of the Burgas-Alexandroupolis oil pipeline. "It is important for the investors, including private ones, that the memorandum will provide a certain political framework for starting this process. Therefore, the signing of the memorandum is only the beginning of the negotiation process," Mr. Khristenko said. "It is a historic moment that will sum up the results of the 13-year-long negotiations," Greek Minister of Development Demetris Sioufas said, commenting on the coming signing of the memorandum. "This project will strengthen cooperation between the three countries and will contribute to the strategic development of the region," he said. The project of the construction of the Burgas-Alexandroupolis oil pipeline was initiated by Russian and Greek companies. The length of the pipeline is expected to be about 312 kilometers with an annual capacity of 35-50 million tons. The project has been estimated at more than $700 million. After the pipeline is put into operation, oil will be brought by sea from Novorossiisk to the Bulgarian port of Burgas, then it will be pumped through the new pipeline to the Greek town of Alexandroupolis and then to the West European countries. This project is an alternative to the delivery of oil through the Black Sea straits of Bosporus and Dardanelles in which traffic is too busy at the present time.

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