Russia Starts Work on Second Phase of Massive Espo Oil Pipeline
International Oil Daily, 18.01.2010
Russian pipeline monopoly Transneft has started work on the second phase of its massive East Siberia–Pacific Ocean (Espo) pipeline, despite skepticism that there will be enough crude oil to fill the line.
The first phase of the line, which opened late last year, runs nearly 2,700 kilometers from Taishet in the Irkutsk region of Eastern Siberia to Skovorodino, 68 km from the Chinese border, and has a capacity of 600,000 barrels per day. The 2,100 km second phase will link the existing line to a new export outlet, Kozmino, on the Pacific coast (IOD Dec.29,p1).
A Transneft spokesman told International Oil Daily that its subsidiary, Transneftstroi, has welded 180 meters of the new line, signaling the official start of construction.
Transneft head Nikolai Tokarev earlier said that most of the work would be carried out by Transneftstroi, although other contractors might be involved. Stroitransgaz, the country's biggest oil and gas construction firm, has confirmed that it will bid in a construction tender. Transneft says the tender results should be announced on Jan. 22.
Espo's second phase will increase the line's overall capacity to 1.6 million b/d. Completion is scheduled for 2012, although sources say 2014 looks more realistic. Preliminary estimates are that work will cost 350 billion rubles ($11.8 billion).
Some, however, doubt that Russia will have enough crude to fill the line. The government has already introduced a number of incentives to get the scheme up and running, setting tariffs for shipments to Kozmino at 1,598 rubles per metric ton ($7.37 per barrel), well below the actual cost of shipments of more than $17/bbl.
Moreover, companies working in East Siberia have from Dec. 1 enjoyed zero export duty on oil produced at 13 fields, a concession expected to be extended to 22 fields. To qualify for the exemption, the oil must have a sulfur content of 0.1%–1% and a density of 694.7–872.4 kg per cubic meter.
To ensure the incentive achieves its intended purpose – and companies do not then ship their crude westward on better terms – Russia's powerful deputy prime minister in charge of energy, Igor Sechin, has reportedly asked the energy ministry to consider limiting the exemption to crude sent east to Kozmino. This should help guarantee enough volumes to fill Espo.
Russian oil export duties, meanwhile, are expected to increase slightly in February after falling this month.
The duty on crude oil may rise to $270.70/ton ($36.93 per barrel) from $267/ton ($36.43/bbl), said Alexander Sakovich, the deputy head of the finance ministry's customs department. The final rate is based on the price of Russian Urals export blend from Dec. 15 to Jan. 14, which averaged $75.915/bbl.
Export duties on light oil products will increase to $194.70/ton from $192.20/ton in January, and on heavy products to $104.90/ton from $103.50/ton.
Nadezhda Sladkova, Moscow
