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13 Jul, 2007 05:17

Siberian-Pacific Pipe: 1,000 km done, 1,500 km to go

Construction of Phase One of the East Siberian-Pacific Ocean pipeline is almost half complete, with the Russian company Transneft welding 1,000 kilometres of the new oil artery. The company is planning to finish the stage next year, with oil companies sta

Although the figure is not of the full length of the pipeline, the head of Transneft, Semyon Vainshtok, called it psychologically important.

“We have built a very difficult segment of the pipeline. The construction was complicated due to environmental peculiarities of the region: river, mountains and swamps. Almost everywhere along the route we used explosives. But the speed of construction is unprecedented despite the fact we were delayed at the start,” he said.

The pipeline was moved from Lake Baikal to avoid environmental problems. This added 500 km to the route and almost doubled the initial cost of the project to $US 11 BLN.

With 1,000 km already welded, Transneft will have to build another 1,500 km to link the starting point of the first stage of the pipeline, the Siberian town of Taishet, with Skovorodino, its final destination. When finished, the ESPO pipeline will bring oil from vast East Siberian fields to Russia’s Far East, and then to oil-hungry Asia. From Skovorodino oil will go to the Kozmino oil terminal by rail and then may be shipped to Japan and Korea.

The new transportation route coupled with the profitability of the Asian markets, prompted some of Russia’s largest oil companies to sign up to use the pipeline.

“Russian companies have already confirmed contracts totalling up to 35 million tonnes of East Siberian oil per year, but the pipeline capacity is only 30. I’m a little bit disappointed because we thought we could transfer some oil from Western Siberian fields, but now we understand the pipeline will be filled only from East Siberia,” Mr Vainshtok said.

Rosneft booked the majority of the pipeline’s capacity – 25 million tonnes will come from its Vankor field, the largest in East Siberia. The rest is shared between Surgutneftegas and TNK BP – seven and four million tonnes of oil per year respectively.

Russia’s Deputy Energy Minister, Andrey Dementyev, says the new route will increase the productivity of oil and gas fields in the region.

“Production will increase because now the companies know they can transport what they extract. We will start receiving the oil as early as this year. Gasprom is also planning to build a gas pipeline along the same route,” he stated.

Transneft said the project will pay back in 20 years. But analysts remain wary saying to recoup $US 11 BLN invested in the pipeline Transneft will have to set transportation tariffs at $US 75 per tonne – five times higher than the current rate.