Russia unplugs pipeline plan to Arctic Ocean
US$2.2B proposal may have boosted supplies to U.S. and Asian markets
Russia, the world’s second-biggest oil supplier, scrapped plans to build a US$2.2-billion pipeline to the Arctic Ocean that may have increased supplies to the U. S. as the country focuses on Asian markets to revive export growth.
OAO Lukoil’s proposed Kharyaga-Indiga link isn’t needed as export growth slows, leaving Russian ports with 1 million tons a month (244,000 barrels a day) of spare capacity, said Sergei Yevlakhov, a vice-president at OAO Transneft, Russia’s state-run oil pipeline monopoly. A planned oil pipeline to Asia will start working on time in 2008 after problems with environmental approval were solved, Yevlakhov said at a conference in London.
Russia’s five-year oil boom may be ending after President Vladimir Putin raised taxes and dismantled OAO Yukos Oil Co., hurting investment in new wells. Lukoil, Russia’s biggest oil producer, has urged the government to cut taxes and add pipelines to revive slowing output and export growth. Lukoil and ConocoPhillips, a Lukoil shareholder, are working to increase output in the Arctic region of Timan-Pechora region.
“ There is no immediate, sharp need for such a link, but there will be in several years especially as we develop Timan- Pechora,” Lukoil spokesman Dmitry Dolgov said yesterday in a telephone interview.
“It’s in our and other oil companies’ interests as it would open the route to oil exports beyond Europe to world markets.”
Lukoil earlier told Transneft that it could have supplied 5 million tons of oil a year (100,000 barrels a day) to the Kharyaga- Indiga link, which the company currently can’t ship through the existing pipeline from the Timan-Pechora region, Osman Sapayev, a deputy director of oil production department at Lukoil, said yesterday in London.
Transneft, whose pipes carry most of Russia’s crude for export and to refineries, expects companies will ship 456 million tons of oil through its system this year, less than the 462 million tons initially estimated, Mr. Yevlakhov said.
Mr. Putin has increased taxes on the country’s oil and gas producers to raise money in a bid to diversify the domestic economy. Russia’s duty on crude oil exports, which changes every two months in relation to European oil prices, rose to US$179.90 a ton on Oct. 1, from US$140 a ton now.
Transneft has brushed aside proposals from companies such as Lukoil and Yukos for privately funded pipelines, concentrating instead on its own plans to expand exports through the Baltic port of Primorsk, north of St. Petersburg, and a planned route to China and Japan.
Russia’s Natural Resources Ministry on Sept. 29 said the feasibility study submitted for the proposed US$11.5-billion oil pipeline to Asia is flawed because it lacks a positive ecological assessment.
Japan and China have lobbied Russia to build the pipeline, which will allow oil from mostly untapped eastern Siberian fields to be shipped to Asian markets and possibly North America. Russia’s existing pipelines were mostly built to carry oil from west Siberia and central Russia to Europe.
China, the world’s fastest-growing oil consumer, is seeking increased supplies from neighbouring Russia to reduce its reliance on the Middle East.