Rusia Petroleum-Yukos tandem threatens Gazprom's plans

Rusia Petroleum, the owner of a license to explore the Kovykta gas condensate field in the Irkutsk region of Russia, is in talks with the Yukos oil company on integrating Rusia Petroleum's gas pipeline with the oil pipeline of Yukos from the Russian city of Angarsk to Daqing in northern China.
According to Rusia Petroleum's representative, this would allow for a 10 % decrease in expenses in organizing the export of Russian hydrocarbons to China. However, he said the final decision on the issue could only be made after the technical and economic feasibility study on the project to develop the Kovykta gas condensate field had been approved.

For its part, Yukos is going to export Russian oil from East Siberian fields to China, in the amount of 30 mm tpy. Yukos announced plans to build the Angarsk-Daqing pipeline back in 2000. Shortly thereafter, the state-run oil transportation company Transneft also announced its intention to build an oil pipeline to China.
Transneft's project is on a larger scale, as it also envisages oil exports to Japan and Korea. According to it, the pipeline should connect Angarsk with the Russian port of Nakhodka in the Primorsky region. But it is impossible to implement both Yukos' and Transneft's projects simultaneously, because there will be a lack of oil to fill both pipelines.

The final decision on the route of the oil pipeline from Russia to China will be made by a special government commission in the autumn of 2003. Reports appeared in March that the government favours Yukos' project, with plans to extend it to the port of Nakhodka in the future. An oil analyst told RBC that the possible alliance of Yukos and Rusia Petroleum on building the "Chinese pipe" will increase the chance that the government will support the Angarsk-Daqing project, although this will significantly reduce Russia's export potential.
According to him, Yukos' interest in the Chinese project might play into the hands of Western business community, and the possible alliance with RusiaPetroleum confirms this (the company is owned by the BP-TNK company). According to the source, the West is interested in Russia's long-term cooperation with China, because in that case Russia's exports to Western Europe will decrease, and this will help American and British transnational corporations strengthen their position on the international hydrocarbon market.

For his part, Konstantin Reznikov, an analyst with Alfa Bank, said that the integration of the two pipelines would be in the interests of both Yukos and Rusia Petroleum. But it is unclear whether Gazprom agrees to it, as the gas giant's managers are not sure about the feasibility of supplying Kovykta gas condensate to the Asian and Pacific markets.
In its proposals on the development of Eastern Siberian and Far Eastern fields, Gazprom suggested that Kovykta gas condensate should be sold on the domestic market. In addition, the closeness of the Kovykta field to the targeted sales markets (China and the Far East) calls into question the feasibility of developing the Chayadinskoye gas field in Yakutia. In this case, it will be difficult for the government to find a potential buyer for a license to develop that field.

Thus, in the opinion of Gazprom officials, it is more reasonable for Russia to develop the Chayadinskoye gas field first, and export the gas to the Asian and Pacific markets, and only after that to start developing the Kovykta field. So, the seemingly attractive integration of Rusia Petroleum's and Yukos' projects can be very unprofitable for the state.
Rusia Petroleum's shareholders are BP-TNK (62 %), the Interros group (25.71 %) and the Property Fund of the Irkutsk region (11.66 %). The State Reserve Committee has already confirmed that the Kovykta field contains about 1.9 bn cm of gas and 124 mm tons of gas condensate.