Russia assures Japan will get ample crude from pipeline

May 03, 2005 02:00 AM

Russia's state-run pipeline monopoly tried to ease Japanese concerns that the first stage of a crude pipeline from Siberia to Russia's Pacific Coast would deprive the energy-hungry nation of needed oil supplies.
Both Japan and China have tried to persuade Russia to give them priority as the pipeline's 4,100 km (2,550-mile) route is planned.

Russia last year agreed for the pipeline to go from eastern Siberia to Perevoznaya on the Pacific coast -- an apparent victory for Japan, which wanted to be the first in line for Siberian crude. But Moscow signed off on the project's first stage, which will cost $ 6.5 bn and carry 600,000 bpd to Skovorodino, just 70 km (40 miles) from the Chinese border in Russia's Amur region. The Russians say rail shipments will supply the Japanese until the pipeline can be completed.
The decision stoked Japanese fears that the Russians would not extend the pipeline to the Pacific coast as quickly as planned, instead favouring a route south to the Chinese city of Daqing -- the centre of its oil industry.

The vice president of pipeline operator Transneft sought to reassure Japanese officials, who have said they may reconsider their possible financing of the $ 11 bn project if the pipe goes to China first.
"We are building to Skovorodino, but at the same time we are building a port in Perevoznaya," the Transneft official Sergei Grigoriev said. Japan was widely expected to put up soft loans for construction. Grigoriev said Russia was not obligated to build the pipeline to suit any one customer, and if China financed a southern branch then there was no reason for it not to be built.
"There are lots of people who want to lend us this money," he said.

China -- the world's third-largest oil importer after the United States and Japan -- saw its imports soar 35 % last year. When complete in 2010, the Russian pipeline will carry 1.6 mm bpd.
Grigoriev would not say how much capacity would be allocated to a possible Chinese route or the terminal at Perevoznaya. The final decision would be " political," he said.

Analysts said the discourse over the pipeline was emblematic of Russia wielding its vast oil and gas reserves to geopolitical ends. They said they anticipated that the main route for the pipeline would favour China.
"The original plan was that about 1 mm (barrels) would go to the Pacific and 600,000 would be spurred down to China," said Chris Weafer, chief strategist for Moscow's Alfa Bank. "It appears we are looking at least at the reverse of that.”
"Russia sees China as a better long-term partner in terms of its attempts to create another geopolitical block to compete against the (United States) and the (European Union)," Weafer said. "Japan is definitely seen as part of the US-influenced block."

Source: Dow Jones
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