Russia approves Pacific oil pipeline

The Russian government has given its final approval for a major oil pipeline to the Pacific, dropping the idea of a route to China.

    The deal will enable Russia to export oil to the US and Japan

    The government said state oil pipeline monopoly Transneft will build an 80-million-tonnes-a-year (1.6 million barrels per day) pipeline from Taishet in East Siberia to the Perevoznaya Bay in the Pacific Primorsk region.

    The deal will enable Russian oil exports to Japan and the US.

    It gave no firm time-frame for the project, but said final proposals should be made before May 2005.


    Russian oil major Yukos has long lobbied for a 600,000 bpd pipeline from East Siberia to China, but the idea collapsed after President Vladimir Putin said he preferred the Pacific route.


    Yukos faces ruin under a huge back tax bill.

    Its main oil unit was nationalised in December in what is largely seen as a Kremlin move to punish Yukos' main owner Mikhail Khodorkovsky for political activities and regain control over strategic industry, lost in chaotic sell-offs in the mid-90s.


    Russian state railways have, however, pledged to supply China with up to 300,000 bpd of crude by rail by 2007, with volumes rising to 600,000 bpd next decade.


    China is keen to diversify energy resources for its economic boom away from the Middle East, but Japan has increased its efforts to persuade Russia to build the Pacific link since Putin made his comments.


    Japanese officials have been reported offering Russia billions of dollars to help finance the construction, but Transneft has said it would be able to accumulate the funds itself.


    The monopoly has dramatically increased its estimates of the pipeline costs to between $15 and $18 billion from the initial $6 billion, prompting some analysts to say that the Pacific pipeline would be too expensive.


    President Vladimir Putin is said
    to have favoured the Pacific line

    The most recent feasibility study by Transneft foresees gradual pipeline construction with the bulk of crude being delivered by rail at the first stages of the project.


    Russia, the world's second largest oil exporter, is hampered by severe pipeline bottlenecks. Experts say that only high oil prices allow it to ship booming output abroad as they make costly rail and river shipments profitable.


    Russia produces about 9.4 million bpd, consumes approximately 2.5 million bpd at home and exports the rest to world markets in the form of oil or refined products.

    SOURCE: Reuters


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