Russian oil majors want compromise on pipelines

Russian oil companies hope to reach a speedy compromise with state pipeline monopoly Transneft on privately-owned pipelines to boost the country's stretched export capacity, a senior Yukos executive said. Yukos and three other firms, LUKoil, Sibneft and Tyumen, all of whose output is growing much faster than export capacity, have touted building a mm bpd link to the Arctic port of Murmansk.
Yukos also wants to build a $ 1.7 bn pipeline to the giant market of China but both projects are strongly opposed by state pipeline monopoly Transneft, which is instead pushing its own projects to export crude East and West. Transneft wants to quadruple the capacity of the new Baltic port of Primorsk to 1.2 mm bpd, but oil firms say the ice-prone port is not economic for US shipments.

"I think a deal will happen and we shall soon reach some kind of compromise with Transneft," Yukos Vice-President Ray Leonard told. "Our aim is not to replace Transneft but to get our oil out. But if we want the pipeline built by 2007 as planned, we have to reach a compromise now," he said. "Production increases mean there is enough oil for Murmansk without taking any away from Druzhba (pipeline to central Europe) or Primorsk or other export routes."
Leonard said the Murmansk project would guarantee oil firms an ice-free port capable of loading supertankers, making shipments to the US market easier and more profitable. "Ultimately this is the only way Russian oil will be able to compete on a large scale in the US market," he added.

The oil companies have warned exports could drop by as much as 1 mm bpd unless new pipelines are quickly built. But their plans were dealt a blow recently by Russian Prime Minister Mikhail Kasyanov who said the state would keep a tight grip for now on oil pipelines and ports.
Transneft officials however reiterated they saw no need for private pipelines and said their own plans for rival export systems to the East and to the West were on track. "Frankly speaking, I don't think there is a role for privately owned pipelines in Russia because our tariff is the lowest in the world," Transneft head Semyon Vainshtok said.
"Besides, it is important to give equal pipeline access to all oil companies, not to discriminate between them and only a state pipeline company can ensure this," he told.

Vainshtok said Transneft would be willing to build the Murmansk pipeline if oil companies demonstrate its economic viability and financial terms are worked out.
Transneft also says its project for a $ 6 bn pipeline to the Pacific port of Nakhodka will give Russian oil an outlet to multiple markets, while the Yukos link would supply just China. Vainshtok said agreements were in place for Japan to provide loan finance for a significant part of the costly project.
Leonard said however that both projects could co-exist, with the Yukos Angarsk-Daqing link acting as the first step, followed at a later date by Transneft's bigger pipeline to Nakhodka. "Our project is based on proven reserves in Tomsk, notpotential East Siberian reserves," he said. "In future, a Pacific pipeline may make sense but significant exploration will have to take place first to prove there are sufficient reserves for it."