(Corrects to say Skovorodino in 10th paragraph in story first published on Dec. 24.)
The East Siberian Pacific Ocean Pipeline, Russia’s multibillion-dollar attempt to tap growing energy demand in Japan, China and Korea, will load its first oil next week.
“This is a colossal piece of work,” Nikolai Tokarev, who heads OAO Transneft, Russia’s oil pipeline operator, said in an interview on Russian state television station Vesti-24 today. “This isn’t just an event for Transneft.”
The pipeline, known as ESPO, will give producers including state-run OAO Rosneft the option to sell oil east or west, while also providing infrastructure to drive development in relatively unexplored East Siberia. It may result in less crude being exported to Europe, according to Transneft, where the International Energy Agency has forecast long-term demand will be stagnant.
The Moskovsky Universitet will be the first tanker to arrive at the pipeline’s terminus, the Far Eastern port of Kozmino, tomorrow to transport a Rosneft cargo and the first phase of the pipeline will open on Dec. 28. The port aims to handle 15 million metric tons (300,000 barrels a day) next year, Tokarev said.
When completed, the $26.2 billion project will include a 1.6 million barrel-a-day pipeline spanning 4,794 kilometers (2,979 miles), a distance longer than that between New York and Los Angeles, as well as the port of Kozmino and a spur pipe supplying China.
The Russian state has supported the project by temporarily forgoing tax rents on some oil fields that will supply the pipe, such as Rosneft’s Vankor. It also brokered a deal allowing Transneft and Rosneft to open a $25 billion credit line supported by China Development Bank Corp. to finance the pipeline’s construction and oilfield development.
Russia will need to follow through on plans to build Far Eastern refineries, giving oil products added value and avoiding competition from Middle Eastern grades that are cheaper to produce and transit, Chris Weafer, chief strategist at UralSib Financial Corp., said by telephone late yesterday.
“Right now, if this were a tennis match I’d have to say it’s advantage China,” Weafer said.
Transneft has so far completed a 2,694 kilometer pipe to Skovorodino, a point near the border with China, where oil will then be transferred to rail cars for the remainder of the journey to Kozmino.
Rosneft and Transneft will begin supplying China with 15 million tons a year in 2011 via a spur from Skovorodino.
When the ESPO link reaches full capacity, China will receive 15 million tons of oil a year and Kozmino will export twice that amount, Tokarev said in an interview posted on the company’s Web site. It will carry 20 million tons of crude to a refinery that Rosneft plans to build, and deliver 10 million to 15 million tons to Rosneft’s Komsomolsk refinery and Alliance Oil Co.’s Khabarovsk plant.
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