Russian government commission says Transneft should head BPS project

Jul 12, 2000 02:00 AM

A Russian government commission headed by Deputy Premier Viktor Khristenko has decided that Transneft ought to take a 100% interest in the Baltic Pipeline System (BPS) project. Transneft should act as the system's sole shareholder and operator, the commission said.
A government representative said on July 12 that he expected Moscow to issue a resolution to that effect the following day. That resolution will outline the plans for establishment and financing of the BPS, he stated.
The spokesman noted that Moscow had not yet decided how to cover the costs of the project. The Kremlin may finance the BPS by charging an extra fee for oil transportation through the Transneft system, he said, or it may introduce a fixed investment tariff to cover all projects, as suggested by Transneft. Earlier, the Russian government had hoped to finance the BPS by involving other companies, both foreign and domestic, in the project.
In 1996, it even signed an agreement with various oil firms. The deal involved Transneft, two Russian companies (Komitek, now owned by LUKoil, and Rosneft), the Russian-Belarusian company Slavneft and five foreign firms (British Gas, Conoco and Williams of the United States, Neste of Finland and Total of France). Transneft managers also stated that the European Bank for Reconstruction and Development (EBRD) might eventually acquire its own equity stake in the project.
However, the 1996 agreement appears to have been nixed, and the government representative said last week that another proposal to divide the workload had also been scrapped. Moscow will not go along with suggestions that the pipeline system be built separately from a planned terminal at Primorsk, near St. Petersburg, he said.

Work on the first stage of the BPS began on March 31 with the construction of new pipeline from Kharyaga to Kirishi (via Usinsk, Ukhta and Yaroslavl) and from Kirishi to Primorsk. These pipelines will be able to carry 12 mm tons of crude oil per year. Some 450 km of new pipe will have to be laid along the route from Kharyaga to Primorsk and another 175 km of existing pipe restored. This stage of the project will cost around $ 460 mm and is due to be completed in 18 months.These pipelines will complement several of the lines already in place. Transneft will let some existing pipelines -- the Usinsk-Ukhta-Yaroslavl-Kirishi line as well as new lines from Kharyaga to Usinsk and from Kirishi to the Gulf of Finland -- serve as part of the BPS.
The second stage will entail expanding the capacity of the whole 2,700-km network of pipelines from 12 mm tons per year to 30 mm tons per year. This is expected to cost $ 2 bn. Transneft has said it expects the first phase to be completed by the end of 2000. It has not said when the second phase might be finished.
Plans for the BPS were drawn up with the goal of providing a new export route for oil extracted in the Russian Far North, but Transneft managers believe the network could reach even further. Transneft has said that BPS pipelines could be used to transport oil from western Siberia and the Ural-Volga region as well as the Timan-Pechora basin. The network could even be connected to other pipes and carry oil from Kazakhstan and other CIS countries, it said. Oil producers in both Russia and Kazakhstan have already committed to exporting some of their output through the system.

Source: NewsBase
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