Bloomberg News

Transneft Asks Russia to Spur Refining, Export Oil Products

February 10, 2006

OAO Transneft, Russia's state- controlled crude-oil pipeline monopoly, urged the government to expand refineries and build a new one in the Far East to capture the higher value of exporting oil products rather than crude.

Transneft is proposing to the government that processing be increased at state-owned OAO Rosneft's Tuapse refinery to 10 million tons a year (200,000 barrels a day) so more fuel can be exported. The refinery converted 4.1 million tons last year while about 6 million tons of crude oil were exported from the port of Tuapse, on the Black Sea, according to Energy Ministry and Transneft data.

``Crude oil export is the fate for underdeveloped countries,'' Transneft Chief Executive Semyon Vainshtock said today in a report posted on the Moscow-based company's Web site. ``Oil refineries must become the end points of our pipelines on the sea coasts.''

The Russian government is developing plans to increase oil product and petrochemical exports. It's also encouraging companies to modernize refineries so they improve the quality of exported fuel and environmental standards.

Transneft is developing plans to build an $11.5 billion oil pipeline across eastern Siberia to Russia's Pacific coast. The company proposed in November to build a 600,000 barrel-a-day refinery at the end of the pipeline to make fuel for exports, according to Vainshtock.

``If we look in the future, a large petrochemical complex should be also built there,'' Vainshtock said.

Transneft is examining a plan to build an oil port in Kozmino bay, near the port of Nakhodka on the Pacific coast, where the pipeline will end. This would be ``an alternative option'' because the original plan to build the port at the Perevoznaya bay faced some environmental problems, Vainshtock said.

Transneft plans to raise crude-oil transportation by as much as 2 percent to 464.8 million tons this year, Vainshtock said. Transneft now has 27.5 million tons of annual surplus capacity in its pipelines.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net Michael Teagarden in Moscow at mteagarden@bloomberg.net.

To contact the editor responsible for this story: Tim Coulter at tcoulter@bloomberg.net


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