Pipeliners

28 February 2008 - Upstream OnLine - Russian President Putin poured scorn on the Nabucco pipeline project today, saying partners such as Hungary and Serbia need only take out a calculator to conclude Russia's plans are more profitable. Putin was speaking ahead of a Kremlin signing ceremony with Hungarian Prime Minister Ferenc Gyurcsany which will add Budapest's support to Moscow's South Stream gas pipeline, which has been competing with the EU-backed Nabucco project. "The task of our partners is simple, take a calculator and look at the figures," Reuters quoted Putin as saying. "It is apparent that the project we propose can be realised and is backed with resources. If someone wants to dig the soil to bury tubes there, we don't mind," said Putin. The EU hopes the Nabucco project will lessen its reliance on Russia by pumping gas from central Asian producers to central Europe via the Balkans. Putin said the security of supply to European energy markets would be strengthened by Hungary joining Russia's South Stream gas pipeline project. "If this project is realised and I have no doubt it will, the role of Hungary as an important link in the European energy chain will grow and the stability of supplies will get stronger," said Putin. Gyurcsany said Hungary was prepared to continue to support Nabucco, but added he believed South Stream will be built first. "We try to keep two things in one pack, so there is more competition. You were faster than the other form of co-operation called Nabucco," said the Hungarian leader. Putin replied that Russia was "not competing with anything".

26 February 2008 - Upstream OnLine - Kazakhstan is planning a new $3.8 billion domestic gas pipeline in a bid to reduce its dependence on gas imports, Prime Minister Karim Masimov said at a government meeting today. The pipeline is to connect the country’s energy-rich west with the heavily populated south, according to a Reuters report. Kazakhstan is a big oil producer but depends on gas imports from neighbouring countries such as Uzbekistan to generate electricity. Uzbekistan sparked concern in southern Kazakhstan last month when it briefly cut flows due to higher domestic consumption. The 1500 kilometre pipeline, due to be built by 2011, will connect Beineu in the west with Samsonovka in the south and is expected to initially supply 5 billion cubic meters of gas a year and then 10 Bcm per year from 2014. Some analysts have expressed doubt over the project's feasibility due to Kazakhstan's limited gas reserves and say it is unclear which deposits will feed the pipeline. Kazakhstan’s gas reserves are estimated at 2 Tcm. Masimov said the government had yet to decide how the project would be financed. Separately he said the government would give state energy company KazMunaiGas a licence to develop the Urikhtau gas deposit with estimated reserves of 40 Bcm.

BUDAPEST, February 26 (RIA Novosti) - Hungary will join Russia's South Stream gas pipeline project to transport Russian natural gas across the Black Sea to the Balkans and on to other European countries. A relevant agreement was signed late on Monday during a visit to Budapest by Dmitry Medvedev, a Russian first deputy prime minister and board chairman at Russian energy giant Gazprom. "We have coordinated a draft intergovernmental agreement to build a pipeline for the transit of natural gas through Hungary, paving the way for [Hungary] to join the South Stream route and for an underground gas storage project," said Medvedev, who is the Kremlin's front-runner in the upcoming presidential elections. Hungarian Prime Minister Ferenc Gyurcsan told a news conference after talks with Medvedev that the two countries would sign a contract on Thursday. He said the gas storage facility would have a capacity of at least 1 billion cubic meters. "The signing is expected to take place on Thursday, February 28, in Moscow," the Hungarian premier said. He earlier accepted Russia's invitation to hold talks with President Vladimir Putin also on Thursday. The South Stream project is planned to transport 10 billion cu m of Russian gas annually across the Black Sea, with the first deliveries scheduled to start in 2013. The South Stream project proposed by Russia's Gazprom and Italy's Eni is a rival project to the Nabucco pipeline backed by the EU and U.S., which will pump Central Asian gas to Europe via Turkey bypassing Russia. Nabucco, which is due to go on line by 2011, will involve Turkey, Bulgaria, Romania, Hungary and Austria. Hungary first said it was seeking to participate in the South Stream project during a visit to Budapest by Russian Prime Minister Viktor Zubkov in December 2007. The country is also considering joining the Nabucco project. Both Medvedev and Gyurcsan agreed that the two gas projects would not affect each other. Gyurcsan said the Hungarian sector of the South Stream pipeline worth around $10-14 billion would recoup its outlay within 15 years, with Hungary controlling a $1.5 billion stake. Medvedev added that the country's sector would have a capacity of at least 10 billion cubic meters. The two parties agreed to establish a joint venture on a parity basis, involving Gazprom, and a 100% state-owned Hungarian company for construction of the Hungarian sector. Russia is a major gas supplier to Hungary, meeting around 70% of the country's gas demands. Last year, Russia delivered 7.5 billion cubic meters of gas to Hungarian consumers, with a commitment to supply 10.7 billion this year. Hungarian gas meets just 18-20% of local needs. The European country currently consumes 15 billion cubic meters a year, with experts predicting that gas consumption will increase to 17-18 billion cubic meters by 2015. Hungary is also a transit country for Russian natural gas to Serbia, Montenegro and Bosnia. Russia and Serbia signed an agreement on Monday to build a gas pipeline for the transit of Russian natural gas through the Balkan country. The agreement was signed in Belgrade in the presence of Medvedev and Serbian Prime Minister Vojislav Kostunica.

BELGRADE, February 25 (RIA Novosti) - Russia and Serbia signed Monday an agreement on implementation of a project to construct a pipeline for the transit of the Russian natural gas through Serbia to the Balkans and on to other European countries. The agreement was signed in Belgrade in the presence of the Russian First Deputy Prime Minister Dmitry Medvedev and Serbian Prime Minister Vojislav Kostunica. "This agreement serves interests of both, Russia and Serbia, and lays the foundation for the regime of energy security in the unified Europe," said Medvedev, who is the Kremlin's front-runner in the upcoming presidential elections. The South Stream project envisions transportation of 10 billion cu m of Russian gas annually across the Black Sea. Russia's Gazprom Neft signed a deal on the purchase of a 51% stake in the Serbia state-owned oil monopoly Naftna Industrija Srbije (NIS) during talks between the two countries' leaders in Moscow on January 25. Gazprom had reportedly offered $580 million for a 51% stake in NIS amid fears in Europe over perceived growing energy dependence on Russia. The joint construction of a stretch of a natural gas pipeline with Russia's Gazprom under the South Stream project will turn Serbia into a regional economic leader, Serbia's prime minister said. The South Stream pipeline proposed by Russia's Gazprom and Italy's Eni is a rival project to the Nabucco pipeline backed by the European Union and United States, which will pump Central Asian gas to Europe via Turkey bypassing Russia. The pipeline will run from Russia's Black Sea coast under the sea to Bulgaria, where it will branch off to different destinations in the European Union, supplying 30 billion cubic meters of gas annually. Serbia initially planned to sell a 25% stake in NIS for $300 million and oblige the buyer to invest another $250 million in the development of the company. The company is estimated as being worth $1.2 billion.

MOSCOW, February 18 (RIA Novosti) - The new head of Transneft, the company managing the construction of an oil pipeline from East Siberia to the Pacific Ocean, is opposed to the speedup of the project, a business daily said on Monday. Nikolai Tokarev, the Transneft president, said the East Siberia-Pacific Ocean (ESPO) pipeline project, slated to pump up to 1.6 million barrels of crude per day from Siberia to Russia's Far East and then on to China and the Asia-Pacific region, could not be sped up as this measure would push up the company's costs considerably. He blamed Transneft's previous management for delays, Vedomosti said. "The project has been accelerated to a maximum. It could be expedited further, if new credit facilities were raised. But this measure would push up the company's costs considerably compared with the planned $12 billion figure," Vedomosti quoted Tokarev as saying. The project's first leg, estimated at $11 billion, was expected to be commissioned in December 2008. However, the Transneft head said on February 7 that the commissioning of the project would be delayed from late 2008 to late 2009. Tokarev also blamed subcontractors for delays in the project's implementation. "All the problems with the ESPO project have emerged due to a simple reason: the interests of those who undertook to do the work and the interests of the project radically diverted. Those who undertook to build the pipeline wanted to earn money at any cost, while the project's interests required a different approach and different arrangements," Vedomosti quoted Tokarev as saying. According to Tokarev, the company's previous subcontractors had little construction experience and enlisted small firms with under-qualified personnel for the project. Transneft has only recently switched to signing direct contracts with subcontracts and has made offers to companies that have the skills and ability to effectively construct the pipeline, Vedomosti said. The ESPO first stage envisages the construction of a 2,757-kilometer (1,713-mile) section with a capacity of 30 million tons (220.5 million bbl) of oil per year. The project's first leg will link Taishet, in East Siberia's Irkutsk Region, to Skovorodino, in the Amur Region, in Russia's Far East. The second leg will stretch for 2,100 kilometers (1,304 miles) from Skovorodino to the Pacific. It will pump 367.5 million barrels of oil annually. The second stage also envisages an increase in the Taishet-Skovorodino pipeline's capacity to 588 million barrels.

MOSCOW, February 11 (RIA Novosti) - Russian companies are interested in large-scale projects to build oil and gas pipelines in India, a source in the Russian delegation about to travel to the Asian country said on Monday. The delegation will accompany Russian Prime Minister Viktor Zubkov during his official visit to India from February 12 to 13. "India intends to build 16,000 km (9,940 miles) of oil and gas pipelines. Russian companies are prepared to participate in these projects," the source said, adding that Russia's Stroytransgaz, partly owned by energy giant Gazprom, is interested in the projects. The construction of the pipelines in India, which will enable the Asian country to provide international oil and gas transit, "could be an interesting element of Russian-Indian cooperation," he said. Russian-Indian cooperation in the fuel and energy sphere has grown steadily in recent years. India's ONGC is participating in the Sakhalin I oil and gas project off Russia's Pacific Coast and is considering large-scale projects together with Russia's state-controlled oil giant Rosneft in Russia, India and third countries, the source said. The Sakhalin I project has recoverable reserves estimated at 2.3 billion barrels of oil and 485 billion cubic meters of natural gas.

MOSCOW, February 7 (RIA Novosti) - The Amber gas pipeline project proposed by Poland is not an alternative to Nord Stream, a Russian presidential aide said on Thursday. The Amber project envisions building a gas pipeline to Europe via Estonia, Latvia, Lithuania and Poland. Poland says the project could be more attractive than the Nord Stream gas pipeline currently being built under the Baltic Sea to Germany. "From an economic point of view, the project is very complicated and much more costly than Nord Stream, and the number of transit countries would increase. It would be neither very profitable nor acceptable to us," Sergei Prikhodko said. Prikhodko added that large amounts of funds have already been spent on the Nord Stream project. The Nord Stream gas pipeline is being developed by Russia's state-controlled gas giant Gazprom and Germany's E.ON and BASF at an estimated cost of $12 billion.

KHABAROVSK, February 7 (RIA Novosti) - Transneft, which manages the construction of an oil pipeline from East Siberia to the Pacific Ocean, said on Thursday the project's commissioning would be delayed from late 2008 to late 2009. The ambitious East Siberia-Pacific Ocean (ESPO) pipeline is slated to pump up to 1.6 million barrels of crude per day from Siberia to Russia's Far East and then on to China and the Asia-Pacific region. The project's first leg, estimated at $11 billion, was expected to be commissioned in December 2008. "It seems it will be possible to complete work and commission the first stage of the ESPO project only in the fourth quarter of 2009," Transneft President Nikolai Tokarev said, adding that the project's first leg was now only 46% ready, while according to the schedule it should have been 67% complete. Tokarev said the harsh conditions in which the pipeline is being built, the delayed start to the project's implementation and the extension of the pipeline's route due to environmental concerns were the main reasons for the delay. He also said that some subcontractors had failed to meet their obligations on time. However First Deputy Prime Minister Dmitry Medvedev, who is on a working visit to Russia's Far East, criticized the project organizers for the delays, saying the project had been hampered by bureaucracy. The ESPO first stage envisages the construction of a 2,757-kilometer (1,713-mile) section with a capacity of 30 million tons (220.5 million bbl) of oil per year. The project's first leg will link Taishet, in East Siberia's Irkutsk Region, to Skovorodino, in the Amur Region, in Russia's Far East. The second leg will stretch for 2,100 kilometers (1,304 miles) from Skovorodino to the Pacific. It will pump 367.5 million barrels of oil annually. The second stage also envisages an increase in the Taishet-Skovorodino pipeline's capacity to 588 million barrels.

05 February 2008 - Upstream OnLine - Poland, Estonia and Lithuania are keen to consider an overland gas pipeline connecting Russia and Germany instead of Nord Stream's plan to build one under the Baltic Sea, Finland's environment ministry said. Finland itself has insisted the Nord Stream consortium, planning the 1200 kilometre subsea gas pipeline, should carry out a thorough environmental study of a southern route, not across Finnish territory. Nord Stream, majority owned by Russian gas export monopoly Gazprom, plans to start building the pipe in the middle of next year and begin deliveries in early 2011. German firms BASF and E.ON own 20% each and Dutch Gasunie has 9% in Nord Stream. Finland said Poland had noted it would also be important to plan how to respond to any emergencies relating to the pipeline. Lithuania called for more investigation on the impact of waste and old munitions on the sea bed as well as the security threat for the Baltic Sea area caused by the pipeline.