Russia: New Oil and Gas Pipelines
New Oil Pipelines:
To increase export capacity, Russia has plans to build a number of new pipelines and export terminals, as well as increase capacity at several existing terminals.
Of these, the Baltic Pipeline System is the largest new pipeline export scheme outside of the Caspian region.
Baltic Pipeline System:
The Baltic Pipeline System involves the construction of three ports on the Russian Baltic coast--at Ust-Luga, Bukhta Batereinayaat, and Primorsk. These three ports will be linked via pipeline to oil fields in northern Siberia to the Gulf of Finland.
The port at Bukhta Batereinayaat, which will have a 140,000 bbl/d capacity, has been under construction since 1997 (as has the Ust-Luga port), and the first half of the $220-million port is scheduled for completion by the end of 2001.
The Primorsk port, scheduled to take 10 years to complete and cost almost $4 billion, is being built to handle 800,000 bbl/d of oil, with the first segment of the port running by the end of 2001 and able to export 240,000 bbl/d.
Russia is negotiating with China to build an export pipeline to allow Russia to supply China's increasing oil demand.
In July 2000, Russian President Vladimir Putin and Chinese President Jiang Zemin signed a memorandum of understanding on a feasibility study for an oil pipeline between the two countries and a commitment by China to buy 300,000 tons (2.2 million barrels) of Russian oil.
The $1.7-billion pipeline initially would have a throughput capacity of 20 million tons per year (400,000 bbl/d), rising to 30 million tons per year (600,000 bbl/d) when it is brought fully on-line in 2010.
Early oil for the pipeline mainly will come from Yukos, Russia's second-largest oil producer, which is prepared to ship its oil from fields in western Siberia.
Expansion by 2010 will occur when oil fields at Angarsk come on stream. Yukos, Russian national oil pipeline monopoly Transneft, and Chinese oil giant China National United Oil Corp. will construct the pipeline. Construction is set to begin in 2003.
However, there is still disagreement over the proposed route of the pipeline, and discussions are continuing on financing, access, and property rights.
The preliminary proposal signed by Chinese and Russian sides calls for the line to stretch 1,400 miles from Angarsk, across Mongolia, then into Beijing.
A second possibility would be a 1,500-mile pipeline through northeastern China. Russia wants to cut the pipeline's distance by traversing Mongolia, but China would like to circumvent Mongolia for security reasons.
About 975 miles of the pipeline will be built in Russia at a cost of $950 million, while the remainder will be built in China at a cost of $650 million.
By the first half of 2001, negotiators will issue a the feasibility report and determine financing, after which a final route will be chosen.
Other Oil Pipelines:
Russia also is looking to upgrade and integrate its main existing export pipeline to Europe, the 1.2-million bbl/d capacity Druzhba pipeline.
In October 2000, Yukos said it planned to integrate the Druzhba pipeline, which runs through Ukraine to central Europe, with the Adria pipeline, running to the Adriatic port of Omisalj in Croatia.
Yukos signed a $20-million agreement with Croatian oil transport company Jadranski Naftovod to modernize the Adria pipeline, which will help integrate the two pipelines and allow direct exports of Russian oil to the coast of the Adriatic Sea.
Transneft, however, has indicated that it wants to build a pipeline bypassing Ukraine to avoid high transit fees charged by Kiev.
The ongoing dispute between Russia and Ukraine over gas and oil transit prompted Transneft to propose a new bypass pipeline, but thus far the idea has not gained much support.
New Gas Pipelines:
With world gas demand increasing, Russia is attempting to increase its capacity to export gas. In order to reach lucrative markets in Western Europe and Asia, Russia is proceeding with the construction of the Blue Stream pipeline to Turkey, planning a bypass pipeline around Ukraine, and exploring gas markets in Asia.
"Blue Stream" Pipeline:
Construction on the Blue Stream gas pipeline from Russia via the Black Sea to Turkey officially began in February 2000.
In March, the Italian export credit agency Sace agreed to guarantee $1 billion in loans for the pipeline, which is being by Gazprom and its Italian partner ENI.
In May, the Japanese Bank for International Cooperation signed another $330-million loan, and the Japanese Ministry of International Trade and Industry has said it will guarantee this and a further $300 million in loans from Japanese lenders. The total cost of the pipeline is projected to be $2.5 billion.
At the earliest, the first of two lines will come onstream in the fall of 2001, with a capacity of 282.5 Bcf per year, doubling to 565 Bcf/year when the second line opens in 2002.
The first gas deliveries from Russia to Turkey are still planned for the second half of 2001, according to Russian Prime Minister Mikhail Kasyanov.
In order to supply the Blue Stream with enough gas and guarantee its primacy in supplying the Turkish market, Gazprom is has been buying up excess gas from bordering countries.
The conclusion of export contracts between Russia and Turkmenistan could delay or even derail plans by Shell and PSG International to build the competing Trans-Caspian Pipeline, which would supply Turkey with gas from Turkmenistan via a pipeline across the Caspian Sea and through Azerbaijan and Georgia to Turkey.
Proposed Ukraine Bypass Pipeline:
On October 31, 2000, Russian President Vladimir Putin announced that Gazprom and Gaz de France had concluded a deal to construct a pipeline across Belarus, Slovakia, and Poland--bypassing Ukraine--that would ship Russian gas to consumers in Western Europe.
The 600-km (373 mile) pipeline, to be built in conjunction with Italian and German companies, could have two lines with a maximum capacity of 2.1 Tcf per year, and would cost an estimated at $2 billion.
The project calls for the Yamal-Europe gas pipeline--currently under construction--to be linked to Slovakia, where it would connect with a network of gas pipelines to Germany, Italy, and France.
Currently, Ukraine transports over 360 Bcf per year of Russian gas—90 percent of Russia's total gas exports--to Europe.
In return, Ukraine receives some 100 Bcf of gas from Gazprom in transit fees, which amounts to 40 percent of the country's 2.65 Tcf-annual gas demand.
Ukraine has been delinquent in its payments to Russia for gas, racking up a debt that Moscow puts at $2 billion.
In addition, Russia has accused Ukraine of siphoning off more gas than it has contracted for, threatening Russia's European customers with gas shortages.
Gazprom currently supplies around 25 percent of European gas demand, and is eager to increase its penetration in the region.
Russian officials say that they need additional export routes to be able to meet Russia's increased gas supply obligations to the European Union (EU) now that they have concluded a long-term energy supply agreement.
Repeated angry statements by Gazprom officials earlier in 2000 suggest that it was Russia's dispute with Ukraine over illegal siphoning of gas that made the Russian company think of sacrificing a shorter route through Ukraine and building alternative gas channels.
The matter of Ukraine's theft of Russian gas became public in 1999 when Gazprom accused Ukraine of illegally siphoning off 1 Tcf of gas (worth $720 million at the price that Gazprom charges Ukraine) and re-exported 190 Bcf of it.
Ukrainian officials admitted to taking more gas than they had contracted for, and pledged to end the practice.
However, Gazprom says that Ukraine has continued to siphon of Russian gas in 2000.
To show its resolve, Gazprom earlier in 2000 opened the first strand of the Yamal pipeline that stretches through Belarus and Poland and can transport 1.06 Tcf of gas to Europe.
The Ukraine bypass pipeline would triple the export potential of this northerly route from the existing 530 Bcf/year to around 1.6 Tcf/year.
Together with the Belarus-Poland-Slovakia pipeline project and the Blue Stream pipeline to that is under construction, a new bypass pipeline could allow Gazprom virtually to eliminate its dependence on Ukrainian transit facilities in several years.
Other Gas Pipelines:
Belgian Tractebel's announcement in the fall of 2000 that it would abandon its concession to manage Kazakhstan's 5,400-mile natural gas trunkline network has opened the door for Gazprom to increase its influence in Central Asia just as production and transit opportunities there are set to rise.
Gazprom and Kazakhstan are in discussions about creating an alliance in the region's gas transport business.
Russia has already contracted with Turkmenistan to import up to 1.06 Tcf of Turkmen gas in 2001, and Gazprom and Itera are negotiating a larger deal to import Turkmen gas for 30 years.
Conclusion of this deal would transform Kazakhstan into a major highway for Central Asian gas headed north into the Russian network.
Russia also is looking to contstruct gas pipelines eastward to export gas to Asia. On September 29, 2000, Russia announced that it will expedite the development of an eastern Siberia gas field, as well as conduct a feasibility study for laying a natural gas pipeline to China in a bid to supply gas to China and a third country.
Russia said it will study feasibility of supplying gas from an offshore gas field to China and supplying LPG from an offshore oilfield to China's southern region.
Source:United States Energy Information Administration.
© 2000 Mena Report (www.menareport.com)