#6
Russian oil giants plan to build new US export route
November 27, 2002
AFP

Four of Russia's largest oil companies agreed to jointly build an export terminal in the northwestern port city of Murmansk that should allow them to boost shipments to the United States.

LUKoil, Yukos, TNK, and Sibneft said in a statement they would build a 1,500-kilometer (930-mile) pipeline to connect Murmansk to an existing Russian oil distribution network.

They are also planning to build a deep-water terminal in Russia's main ice-free northern port to welcome 300,000-tonne oil tankers that would be able to travel as far as the United States.

A fifth oil company, Surgutneftegaz, may also join the project, Interfax quoted Yukos chief Mikhail Khodorkovsky as saying.

"If those hoping to take part continue to come foward so quickly, then two strands may be built and the capacity could reach 120 million tonnes," he said.

Officials have yet to decide to which network the new pipeline would connect, the news agency said.

With four partners, the project is expected have a capacity of around 80 million tonnes of oil per year -- or 1.2 million barrels per day (bpd) -- destined mainly for the United States and Western Europe, the companies' joint statement said.

The project will cost the oil giants between 3.4 and 4.5 billion dollars (euros), depending on which route they choose, it added.

Construction is set to begin in 2004 and be completed by 2007.

Combined, LUKoil, Yukos, TNK, and Sibneft produce more than half of all oil in Russia, the world's second-largest oil producer. The country produces 7.3 million barrels per day (bpd) and exports three million bpd.

New export routes are seen as essential to finding a market for the steadily increasing amount of oil produced in Russia, whose domestic demand has remained relatively stable while production has shot up over the past four years.

A willing recipient is the United States as it seeks to reduce its dependence on Middle East oil. In May, Moscow and Washington said they were launching "an energetic dialogue" to explore boosting Russian oil shipments to the United States.

The new project seeks to fill a major gap in Russian oil transport, which has no simple export route to the United States and no port large enough to host the large tankers required to ship oil to North America.

Russian oil currently takes a complicated route to get across the Atlantic. It is loaded onto tankers in the Black Sea that are small enough to cross the Bosphoros Strait. The oil is then unloaded and re-loaded onto larger tankers that make their way across the Mediterranean Sea.

The deep-water terminal at Murmansk may provide a solution, but it is too early "to evaluate its potential before a feasibility study of its potential is carried out," said Kakha Kiknavelidze, an analyst at Troika Dialog.

Another project aiming to facilitate oil transport to the United States is also being explored, with a plan to link the Druzhba and Adria pipelines from western Russia to a the deep-water port of Omisalj in Croatia.

LUKoil is Russia's largest oil producer, Yukos is second, TNK fourth and Sibneft fifth, while Surgutneftegaz is the country's third largest oil company.

BACK TO THE TOP    #233 CONTENTS    NEXT ARTICLE