Oil traffic between Russia and China in a bottleneck

Apr 25, 2005 02:00 AM

Russia’s plans to deliver record volumes of crude oil to China may collapse.
The reason for the possible failure is bottlenecks at Russians oil terminals that were built for far smaller volumes than those envisaged in Russian-Chinese contracts. Plans to enlarge the oil terminals and increase their capacity are still being discussed.

This year alone 1.4 bn roubles ($ 50 mm) will be invested in a Russian Railways (RZD) project to modernize the Trans-Siberian Railroad (the only transport artery for eastbound exports). An estimated 5.8 bn roubles ($ 209 mm) are needed to complete the project.
The funds are available under the program to increase oil supplies to China. According to the agreement signed by Vladimir Putin and Chinese President Hu Jintao on Oct. 14, 2004, Russian Railways should deliver to China no fewer than 10 mm tons of oil this year, and 15 mm tons in 2006.

But experts believe the investments will not be as effective as RZD hopes. Developing the rail infrastructure alone will not be enough to fulfil the export plans, because there is not enough capacity to pump oil from the trunk pipeline into rail tank trucks.
Terminal owners admit that the existing capacities cannot handle the stipulated 10 mm tons bound for China, but do not want to spend their own funds on new equipment. Russian Railways does not intend to invest in unrelated facilities, in this case oil-loading racks, as it believes producers should build and service oil terminals.

The press secretary of state-owned Rosneft has admitted that the company is studying the possibility of financing the construction of new oil-loading capacities. The vice president of Transneft, the oil pipeline monopoly, said his company also had nothing against new oil-loading racks being built, but was not planning to build anything itself. He believes the expenditures on new pumping stations and other facilities may be included in the tariff for oil companies, and investment should fund construction.
Until the oil companies decide what to do about oil terminals the issue of timely deliveries of crude to China remains very much under question.

Source: Neftegaz.RU
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