Russia to build pipeline to ship oil from western Siberia to China

Russia has rejected a Japanese proposal to lay a trans-Siberian pipeline to supply oil to Japan and will instead build a shorter pipeline to ship oil from western Siberia to China, a senior Russian official said.
Russian Deputy Foreign Minister Alexander Losyukov said the Russian decision, expected to be formalized early next month, is based on commercial viability of the project.

Japan and China, both major oil importing countries, have been fiercely lobbying for the oil pipeline to tap the oil reserves found in the Angarsk area west of Lake Baikal. Japan, which has offered to finance the entire pipeline project, wants Russia to build a 3,700 km pipeline from the Siberian city of Angarsk through the northern coast of Lake Baikal to the Russian far eastern port city Nakhodka.
China wants Russia to build a pipeline between Angarsk and Daqing, an inland city in Heilongjiang Province located halfway between Angarsk and Nakhodka. Losyukov said Russia modified the Chinese proposal by routing the pipeline north of Lake Baikal, instead of using a southern route.

The northern route would partly overlap the route proposed by Japan, thus leaving open the future possibility of building a branch pipeline to Nakhodka. Apart from commercial viability, Losyukov indicated that Japan has missed the bus in the race for the pipeline project. "For years, Japan has shown no response to our calls," Losyukov said.
Japan's Prime Minister Junichiro Koizumi proposed the Angarsk-Nakhodka route during a visit to Russia in January, raising the prospect of using the pipeline to export Russian oil to South Korea and other Asian countries. Losyukov said the Angarsk oil reserve is not large enough to supply both China and Japan, and oil supply to Japan would have to wait for the discovery of oil reserves in eastern Siberia.

Hoping to persuade the Russians, Japan sent its top energy official twice to Moscow. In a visit to Moscow earlier this month, Iwao Okamoto, director general of Japan's Agency for Natural Resources and Energy, told Russian officials that Japan is ready to finance the $ 5 bn Angarsk-Nakhodka pipeline project so long as the loans are guaranteed by the Russian government.
Russia appears to have declined the conditions-attached loan offer. Losyukov said making the repayment guarantee is not part of Russia's government policy.