Eric Watkins
Senior Correspondent
LOS ANGELES, Apr. 25 -- Semyon Vainshtok, head of Russia's state-owned pipeline company OAO Transneft, said the planned Eastern Siberia-Pacific Ocean crude oil 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 would start before 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 main 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.
Last week, 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.
The pipeline will run along the shoreline of Baikal for about 100 km, according to Transneft's current plans. Experts have 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 Apr. 20. "Every year, 500 tonnes of oil enters the lake down the Angara River alone," he said.
Last month Russia's environmental watchdog approved the pipeline, 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.
Contact Eric Watkins at [email protected].
