Russia has set aside plans to build a $2.2 billion pipeline to the Arctic Ocean that may have increased supplies to the West, looking instead at Asian markets to the East.
That’s according to Sergei Yevlakhov, a vice-president at Russia’s state-run pipeline monopoly OAO Transneft, who told a London conference that the proposed Kharyaga-Indiga link isn’t needed as export growth slows.
No less important, he told conference delegates, Transneft’s planned oil pipeline to Asia will start working on time in 2008 after problems with environmental approval are solved.
But he may be too optimistic.
Over-optimism?
A spokesman for privately owned Lukoil granted there is no immediate need for a link, but there will be in several years, especially as the firm-along with shareholder ConocoPhilips-develops reserves in the arctic region of Timan-Pechora.In fact, politics seems at play here, as Lukoil, Russia’s biggest oil producer, has urged the government to cut taxes and add pipelines to revive output and export growth. That’s a slap in the face of Transneft.
For its part, Transneft has frequently disregarded proposals for privately funded pipelines, preferring instead to strengthen its own position by expanding exports through the Baltic port of Primorsk, north of St. Petersburg, as well as through a new pipeline to export terminals on the Pacific Coast.
Transneft wants that pipeline to run from the town of Tayshet in Siberia’s Irkutsk region to Skovorodino in the Amur region. From Skovorodino, crude oil will be piped east to Russia’s Pacific Coast, with a possible branch south to China.
Despite Yevlakhov’s optimism, however, the planned route eastward has hit a very important snag: environmentalists seeking to protect the natural habitat near the pipeline route at Lake Baikal.
Green power
A couple of weeks ago, Russia’s Natural Resources Ministry ordered Transneft to stop construction of the oil pipeline, claiming that the company had disregarded the environmental conditions given by the government upon approval of the project.
The ministry claimed that Transneft was instructed to detour the route of the pipeline by about 100 km north of the lake. It noted that Transneft had changed the intended route of the pipeline to pass within 800 m of the lake, which holds 20% of the world’s fresh water.
The Transneft project has raised other environmental concerns due to an oil terminal it plans on the shore of Perevoznaya Bay on the Pacific Coast, which ecologists warn would create the risk of major oil spills in an area that is home to a rich marine life, among other things.
Analysts said that the decision could represent a landmark victory for environmental policy-making in Russia. But it also looks like something of a landmark decision for private oil companies, given that their own plans were being thwarted by Transneft’s eastern pipeline.
Indeed, one wonders whether the private firms have suddenly developed green thumbs.✦
