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Tuesday, May 31, 2005

Yukos, Surgutneftegaz to use eastern Siberian oil pipeline

MOSCOW, May 31 (RIA Novosti) - Industry and Energy Minister Viktor Khristenko told President Vladimir Putin yesterday that Yukos and Surgutneftegaz would provide oil for the Eastern Siberia-Pacific pipeline, today's issue of Gazeta, a daily, reported. Discussions around the Eastern Siberian oil pipeline had continued for six years, but the project's first stage should now be completed in 2008. Oil major Yukos initially wanted the pipeline to go from Angarsk to Daqing, China, as it saw China as the main oil importer. However, Transneft, another exporter, took the view that the pipeline should go to the Pacific port of Nakhodka and the number of prospective customers had to be increased. Prime Minister Mikhail Fradkov endorsed the final pipeline route in late 2004. It will stretch from Taishet in Siberia's Irkutsk region toward the Skovorodino district center in the Amur region, eventually reaching Perevoznaya harbor in the Maritime territory. This route, which will diversify oil-sale markets, has some drawbacks. It will pump 80 million metric tons of oil per year. However, existing Eastern Siberian deposits will make it impossible to fill this pipeline to capacity. Rosneft, which has signed an oil-supply contract with China, can hardly provide enough oil. Moreover, this state-run company would have to renounce its European oil exports and domestic market sales if it opts for the Asian market completely. The selection of Yukos and Surgutneftegaz was no coincidence. First, their assets are located near the projected pipeline. Second, Russian officials will control all oil-sale proceeds, which at today's prices would exceed $27 billion. Market players think that Surgutneftegaz is already controlled in the interests of high-ranking Russian bureaucrats and Rosneft may acquire Yukos assets in the near future. The state-run company is a major Yukos creditor and has won more than $2 billion from it in court. This sum total may grow five-fold, thereby enabling Rosneft to take over Tomskneft, a Yukos subsidiary, in exchange for debts. Therefore, the paper said the state would have solved its problems: it would have found enough oil for the pipeline and maintained exports currency earnings.

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