Russia Scraps Oil Link Aimed at U.S. Amid Asia Focus
Russia Scraps Oil Link Aimed at U.S. Amid Asia Focus
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Oct. 11 (Bloomberg) -- Russia, the world's second-biggest oil supplier, scrapped plans to build a pipeline to the Arctic Ocean that may have increased supplies to the U.S. as the country focuses on Asian markets to revive export growth.
OAO Lukoil's proposed Kharyaga-Indiga link isn't needed as export growth slows, leaving Russian ports with 1 million tons a month (244,000 barrels a day) of spare capacity, said Sergei Yevlakhov, a vice president at OAO Transneft, Russia's state-run oil pipeline monopoly. A planned oil pipeline to Asia will start working on time in 2008 after problems with environmental approval were solved, Yevlakhov said at a conference in London.
Russia's five-year oil boom may be ending after President Vladimir Putin raised taxes and the dismantled OAO Yukos Oil Co., hurting investment in new wells. Lukoil, Russia's biggest oil producer, has urged the government to cut taxes and add pipelines to revive slowing output and export growth. Lukoil and ConocoPhillips, a Lukoil shareholder, are working to increase output in the Arctic region of Timan-Pechora region.
``There is no immediate, sharp need for such a link, but there will be in several years especially as we develop Timan- Pechora,'' Lukoil spokesman Dmitry Dolgov said today in a telephone interview. ``It's in our and other oil companies' interests as it would open the route to oil exports beyond Europe to world markets.''
Dolgov declined to directly comment on Yevlakhov's comments.
Transneft, whose pipes carry most of Russia's crude for export and to refineries, expects companies will ship 456 million tons of oil through its system this year, less than the 462 million tons initially estimated, Yevlakhov said.
Putin has increased taxes on the country's oil and gas producers to raise money in a bid to diversify the domestic economy. Russia's duty on crude oil exports, which changes every two months in relation to European oil prices, rose to $179.90 a ton on Oct. 1, from $140 a ton now.
State Pipelines
Transneft has brushed aside proposals from companies such as Lukoil and Yukos for privately funded pipelines, concentrating instead on its own plans to expand exports through the Baltic port of Primorsk, north of St. Petersburg, and a planned route to China and Japan.
Russia's Natural Resources Ministry on Sept. 29 said the feasibility study submitted for the proposed $11.5 billion oil pipeline to Asia is flawed because it lacks a positive ecological assessment.
Japan and China have lobbied Russia to build the pipeline, which will allow oil from mostly untapped eastern Siberian fields to be shipped to Asian markets and possibly North America. Russia's existing pipelines were mostly built to carry oil from west Siberia and central Russia to Europe.
Chinese Demand
China, the world's fastest-growing oil consumer, is seeking increased supplies from neighboring Russia to reduce its reliance on the Middle East.
OAO Rosneft, Russia's state-owned oil company, has taken over this year as the country's biggest supplier to China, supplanting Yukos, the nation's biggest exporter before the government levied $28 billion in back tax claims against the company. Rosneft in December paid $9.3 billion to acquire OAO Yuganskneftegaz, a 1 million-barrel-a-day oil producer the state seized last year from Yukos.
Rosneft plans to ship 4 million tons of oil to China this year, out of 10 million tons of total scheduled shipments to the Asian state, OAO Russian Railways said in July.
Rosneft has applied to ship an extra 1.2 million tons of crude to China next year through pipelines that run across Kazakhstan, Yevlakhov said today.
