Bloomberg News

Russian Ministry Says Pipeline to Asia May Lack Oil

December 08, 2006

Russia may not have enough oil to fill a pipeline to Asia because companies such as state-run OAO Rosneft, OAO Gazprom and BP Plc (BP/)'s Russian unit are too slow to develop fields in eastern Siberia, a ministry official said today.

The companies have barely started work at the majority of their licensed deposits in the region, which threatens plans to start pumping 30 million tons of oil a year (602,500 barrels a day) through the link by the end of 2008, Deputy Natural Resources Minister Anatoly Temkin said today in a statement.

Russia's oil pipeline operator OAO Transneft is building a $11.5 billion link across eastern Siberian to the Pacific coast to tap into surging demand for fuel in China, the world's second- largest energy consumer, as well as Japan and Korea.

Regulators should have ``changed their licensing agreements, or if needed, revoked the licenses or used economic measures to force'' companies to speed up work at the fields, Temkin said.

Russia's Resources Ministry is cracking down on extraction companies for taking too long to develop their fields as the government tightens control over the country's energy riches and seeks to boost flagging output. Among them are TNK-BP's license to the Kovytkta gas field in Siberia and Total SA's Kharyaga field in the Arctic. None of the licenses has been revoked yet.

Rosneft and TNK-BP, the country's second- and third-largest oil producers, plan to pump 3.21 millions barrels in 2008 at their Verkhnechonsk field in the Irkutsk region, according to Rosneft's Web site. The companies plan to build a link to a nearby field and then feed the oil into the Pacific pipeline. Rosneft says the field holds 81.8 million barrels of proved crude reserves.

``We're well on schedule with the pilot development of Verkhnechonsk,'' TNK-BP spokeswoman Marina Dracheva said today.

Rosneft's Nikolai Manvelov said the company had not received any official notification on the matter and stood by its output targets for Asian exports. Rosneft will sell 10 million tons of crude and 2 million tons of oil products to China this year, worth $7 billion.

OAO Gazprom-Neft's Natalia Vyalkina said she had no immediate comment, because the company has never said how much crude it would send through the Pacific Ocean pipeline. Such statements are little more than ``general public voicing,'' she said.

To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net; Yuriy Humber in Moscow at yhumber@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.


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