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Wednesday, June 10, 2009

Transneft launches construction of 2nd stage of Baltic pipeline

UNECHA, June 10, 2009 (RIA Novosti) - Russia's oil pipeline monopoly launched on Wednesday the construction of the second stage of the Baltic Pipeline System, designed to diversify the country's oil exports. The official ceremony of welding the first joint of pipeline was held in the Bryansk region in western Russia. The ceremony was attended by Russian Deputy Prime Minister Igor Sechin, Transneft CEO Nikolai Tokarev, Energy Minister Sergei Shmatko and regional administration officials. The Baltic Pipeline System-2, with an estimated cost of 120-130 billion rubles ($3.9-4.2 billion), will run from the Bryansk Region to the northwest Leningrad Region port of Ust-Luga with a branch going to the Kirishi oil refinery. The project will be funded through long-term ruble-denominated bond issues by pipeline monopoly Transneft. The bonds will be placed through a private offering among state-controlled financial organizations. The construction of the BPS-2 is to be completed two years later. Oil will start to be transported in late 2012 with an initial throughput capacity of up to 30 million metric tons (220 million bbl), which will subsequently be raised to 50 million tons per year (367 million bbl). The first stage of the Baltic Pipeline System, with a capacity of 12 million tons of oil annually and designed to transport oil from both Russia's oil-rich regions and Kazakhstan, was commissioned in 2001. Its current capacity is 75 million tons. The BPS-2 project emerged during an oil dispute between Russia and Belarus in January 2007, when Russia cut off supplies to Europe for four days via the Druzhba pipeline after Belarus refused to let Russian oil pass through the country without payment of a transit duty.

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