Odessa-Gdansk pipeline will not compete with Russian pipelines

Nov 02, 2007 01:00 AM

The Odessa-Brody-Plock-Gdansk oil pipeline will not be capable of competing with Russian trunk pipelines, the new head of oil pipeline operator Transneft, Nikolai Tokarev, said.
"It cannot be viewed as a rival to Russian pipeline systems, because its rated capacity is nine mm tons," Tokarev said. "If this [is] compared to [the] 450 mm tons of oil pumped through the Transneft system, there is nothing to comment on."

It had earlier been reported that Azerbaijan, Georgia, Ukraine, Poland and Lithuania had signed an agreement on creation of a joint venture to design and build the Odessa-Brody-Plock-Gdansk oil pipeline. The oil pipeline is supposed to provide an alternative to imports from Russia, allowing oil exports from the Caspian and Black Sea regions to the Baltic Sea region.
The pipeline ends in the town of Brody now, while the successful implementation of the project requires that the parties "carry it to completion," Tokarev said. Another factor promoting successful implementation ofthe project is oil delivery agreements, Tokarev said.

"Even if it is completed and extended to Gdansk, it will not offer any serious competition, because this is a pipeline and oil should be pumped through it," Tokarev said. "And the issue of where to take oil [from] has remained open."
Tokarev said the issue of oil supply remained a crucial factor in the pipeline's feasibility.
"Azerbaijan produces roughly 40 mm tpy," he said. "Some 30 mm tons of [that] amount go through the Baku-Tbilisi-Ceyhan pipeline. Azeri domestic consumption accounts for another 8 to 9 mm tons. And there remain only 1 to 1.5 mm tons which Azerbaijan could provide within the framework of coordinated programs of these four countries."

The Transneft chief said such questions needed to be answered before the project could go ahead.
"Lithuania, Poland, and Georgia are not oil producing countries," he said. "This means that valid and comprehensible calculations concerning what can be used to fill the pipe if the $ 2 bn planned for the [project] implementation are spent, should be made."

The Odessa-Brody trunk pipeline was built in 2001 to ship Caspian oil. It was not used for several years. The Ukrainian government asked PricewaterhouseCoopers to prepare a business plan on the extension of the pipeline to the Polish town of Plock in 2003.
According to the business plan, the project to build a pipeline with a capacity of 10 mm tpy is worth $ 300 mm, while another $ 150 mm should be spent on increasing its capacity up to 25 mm tons of oil per year. The Ukrainian government agreed to allow the pipeline to pump in reverse to transport Russian oil in June 2004.

Russia's Transneft and TNK-BP signed a supplemental agreement on December 26, 2006, to extend by three years an existing agreement from November 16, 2004, between Transneft, Ukrtransnafta and TNK on partnership and the coordination of oil transport throughout Russia and Ukraine.
The Odessa-Brody pipeline reverse-pumped 16.946 mm tons of crude oil between September 2004 and September 30, 2007, generating $ 187.8 mm in transit and port fees.

Source: Interfax
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