The planned Eastern Siberia-Pacific Ocean crude oil pipeline, which has taken some route-and possibly economic-swerves recently, is raising supply questions for Europe.
Semyon Vainshtok, head of Russia’s state-owned pipeline company OAO Transneft, said the pipeline will reduce Russian oil deliveries to Europe.
“We have saturated Europe with oil. And as any economics handbook will tell you, excessive supply makes prices fall. But we do not have the means to decrease supply: All our (oil) exports are directed at Europe,” Vainshtok told the Nezavissimaia Gazeta newspaper.
“(As) we turn to China, South Korea, Australia, Japan, this will take oil away from our European comrades,” he said, adding that this would mark a “very interesting” trend for Russian oil companies.
Vainshtok said construction of the 4,000-km pipeline was scheduled to start at the end of April in the Siberian city of Taishet. The Eastern Siberia-Pacific Ocean pipeline is expected to transport as much as 1.6 million b/d from Taishet in the Irkutsk region to Perevoznaya Bay on Russia’s Pacific coast.
The total cost of the project, intended to allow deliveries to China as well as shipment to other countries from Russia’s Pacific coast, will be $6.5 billion, the newspaper said. Other estimates have put the cost as high as $11.5 billion.
Russia expects a grant from China to build a branch off the trunkline from Skovorodino to the Chinese border and is also trying to secure a $2 billion loan for the main project from a consortium of western banks, Vainshtok said.
The cost of moving oil through the pipeline will be $38.80/tonne, he said, about 40% of the $96/tonne currently charged by Russia’s rail system for deliveries to China.
Environmental objections
Vainshtok also pledged that Russia would lay the pipeline despite the objections of environmentalists.
Dismissing environmentalists’ concerns as groundless, Vainshtok said the pipeline’s planned safety features would stop any potential oil spill. He said an alternative route to bypass environmentally sensitive Lake Baikal would raise costs by nearly $1 billion and render the project unprofitable.
According to Transneft’s original plans, the pipeline would run along the shoreline of Baikal for about 100 km. But experts warned that about 3,000 tonnes of oil would reach the lake within 20 min in the event of an accident. The area is seismically unstable.
“Even if all the defense measures are breached then, by our assessment, no more than 171 kg of oil will reach Baikal,” Vainshtok told Ekho Moskvy radio on Apr. 20. “Every year, 500 tonnes of oil enters the lake down the Angara River alone,” he said.
Russia’s environmental watchdog approved the pipeline, with its route skirting Lake Baikal, as did the Russian Emergency Situations Ministry. Moreover, following passage of a law in the Russian parliament on Apr. 12, Baikal’s protection zone will extend just 500 m, effectively allowing the pipeline to run less than 1 km from its shores.
Route shift
In late April, however, Russian President Vladimir Putin said the pipeline project should be implemented on schedule but shifted away from Lake Baikal for ecological reasons.
His announcement contradicted Vainshtok and Transneft’s original plan.
Agreeing with the Transneft chief that construction should proceed on schedule, Putin nevertheless declared, “If there is even a negligible grain of danger of Baikal contamination, we, thinking about generations to come, must do everything in order not to simply minimize but exclude it.”
Putin said the pipeline’s route should be moved more than 40 km to the north of the lake, well beyond Baikal’s drainage area.
He said the work should begin from both ends of the pipeline and that, as construction converges toward Baikal, “all the documents must be developed, [and] the needed prospecting completed so that the work in the Baikal area can be continued.”
Vainshtok called Putin’s decision to change the route for ecological reasons “totally unexpected” and said, “We were totally convinced that the route we proposed, which was much shorter, was totally safe.”
Vainshtok said Putin’s decision will fundamentally change the economics of the project in ways that are hard to estimate.
“I cannot say by how many kilometers the pipeline will be lengthened and how much more it will cost. For this it is necessary to carry out preliminary research,” Vainshtok said.
Transneft Vice-Pres. Sergey Grigoryev said: “Transneft’s reaction is extremely positive, as this finally means a line has been drawn under the issue. Moreover, this line has been drawn by the president, so there will be no further talk of moving it closer or further away and so on. So, now we have an order that we will carry out.”
