Japan, Russia agree to two-stage pipeline to Pacific

Nov. 28, 2005
Japanese Prime Minister Junichiro Koizumi and Russian President Vladimir Putin have agreed to the construction of a two-stage pipeline aimed eventually at delivering crude oil produced in eastern Siberia to the Pacific (OGJ, Nov.

Japanese Prime Minister Junichiro Koizumi and Russian President Vladimir Putin have agreed to the construction of a two-stage pipeline aimed eventually at delivering crude oil produced in eastern Siberia to the Pacific (OGJ, Nov. 14, 2005, Newsletter).

Russia’s state-run pipeline firm OAO Transneft will build a pipeline linking Taishet in Irkutsk with Skovorodino in Amurskaya, where a branch point will be established for a China-bound spur.

Russia will then determine if the pipeline can be extended onward to Perevoznaya, the planned export terminal for a Pacific-bound route, after determining the amount of oil reserves in the region. The agreement apparently ends a long-running dispute between Japan and China over construction of the pipeline. China had been lobbying Russia to extend the pipeline to Daqing in China, while Japan wanted Russia to extend it to Perevoznaya on the Pacific coast. Both Japan and Russia hailed the agreement.

According to a statement released Nov. 21 from the Russian government, Russia and Japan consider that the fast development in full of the pipeline along the route from Siberia to Skovorodino and Perevoznaya answers the strategic interests of both sides.

Second phase

Separately, Japan’s foreign ministry said that by early 2006 the two nations aim to share the same understanding on the terms for a potential agreement on the second phase of the project.

Underscoring the potential rewards of that longer-term arrangement, Putin-on a state visit to Tokyo-told Japanese business leaders, “The construction of the oil pipeline, leading from eastern Siberia to the Pacific Ocean, opens big prospects.”

Putin added, “We are going to lead it to the Pacific coast for bringing energy resources to the Asia-Pacific region, including Japan.”

Russian industry leaders also played up the agreement between the two nations, regarding the oil pipeline, as well as other projects.

“Rosneft will be playing an ever growing role in this trade,” Rosneft Chief Executive Officer Sergei Bogdanchikov told a Russian-Japanese economic forum Nov. 21 in Tokyo.

“We hope that by 2008, the first segment of the pipeline, with a capacity of 30 million tonnes[/year], will become operational,” Bogdanchikov said. “By 2015, Russia will provide 50 million tonnes[/year] of hydrocarbon fuel to the Pacific market.”

Bogdanchikov also stressed the significance of the Sakhalin IV and Sakhalin V projects for the deliveries.

OAO Gazprom Chief Executive Alexei Miller said his company also was considering pipelines to provide gas to countries in the Pacific region.

Meanwhile, in connection with Putin’s visit, Gazprom, the Japanese Agency for Natural Resources and Energy (JANRE), and the Japanese Ministry of Economics, Trade, and Industry signed a framework agreement on Nov 21.

The two sides will hold comprehensive discussions on setting up new forms of gas processing and chemicals production in eastern Russia and organizing exports of gas, oil, chemicals, and gas liquids from Russia to Japan.

The countries will also study the possibility of building production facilities in Russia with the use of Japanese technology and financing from JANRE.

The framework agreement also provides for cooperation in projects that involve investment by Japanese companies in developing hydrocarbon resources in eastern Russia, as well as Gazprom investments in Japan.