13 May 2004 01:47
Price tag for fuel link to Pacific could double to Dollars 12bn
The cost of an ambitious 4,000km oil link across eastern Siberia to
Russia's Pacific port of Nakhodka could rise to Dollars 12bn (Euros
10bn, Pounds 6.8bn), according to a senior executive working on the project.
Sergei Grigoriev, deputy head of Transneft, the Russian state-controlled oil
pipeline operator, gave the fresh estimate as indications further
strengthened that Moscow would favour the Nakhodka pipeline over a shorter
rival route to Daqing in China.
In an interview with the FT, Mr Grigoriev said that Transneft hoped to
complete a feasibility study on the route from the Siberian town of Taishet
to Nakhodka by the end of this year, and said his company was not examining
any alternative routes.
The new figure could prove a shock to the Japanese government, which has
lobbied hard for the Nakhodka route as it seeks new, secure energy supplies.
It has offered to help underwrite the project in Russia on commercial terms,
but had originally anticipated a price-tag of about Dollars 6bn.
Despite the far lower costs of the Daqing route, the Russian state is
becoming involved in developing a long-term energy strategy in line with its
geopolitical interests, against a backdrop of sharply rising oil prices.
Following problems with its Blue Stream gas pipeline to Turkey, it is keen to
avoid reliance on a single country, and Nakhodka has the advantage of giving
it multiple outlets for its oil by sea.
Mr Grigoriev said Transneft was an extremely competitive pipeline operator by
international standards, and he was confident that oil transport tariffs to
Nakhodka could still be achieved at attractive rates.
His comments that his company was studying no other route came in spite of
insistence by Russian officials that no decision has yet formally been made
between Daqing and Nakhodka, and indications that a final announcement will
not be issued until the end of this year.
However, Yuri Trutnev, Russia's natural resource minister, has indicated
that the "sensible solution" for the market is via Nakhodka, and
that Mikhail Fradkov, the Russian prime minister formally reappointed by
President Vladimir Putin yesterday, recently said his country would not
permit privately funded pipelines.
Many analysts expect Russia to offer China the face-saving prospect of a
future "branch" off the Nakhodka route to Daqing, as well as the
possibility of greater shipment by rail.
Yukos, the embattled oil group facing a series of investigations by the
Russian authorities, had previously lobbied for a route from the Angarsk
refinery to Daqing, but its executives have taken a far lower profile in
recent months with the arrest on fraud and tax evasion charges of Mikhail
Khodorkovsky, its former chief executive and largest shareholder.
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