Watching the World: A pipeline stage issue

June 13, 2005
Transneft CEO Semen Vainshtok is sure that the proposed Eastern Siberia-Pacific oil pipeline will have enough oil to become commercially viable.

Transneft CEO Semen Vainshtok is sure that the proposed Eastern Siberia-Pacific oil pipeline will have enough oil to become commercially viable.

“There can be no doubt that the pipeline will function at its total working capacity. Eastern Siberia can certainly secure the filling of the eastern oil pipeline,” Vainshtok told Russia’s parliament on June 7.

Transneft has decided to build its pipeline in two stages, with the first 2,390 km stretch extending from Taishet in Siberia to Skovorodino near the Chinese border, and the remaining 1,800 km or so extending from Skovorodino to Perevoznaya Bay.

Altogether, the line would carry as much as 80 million tonnes/year of crude oil.

A major project...

Laying the pipeline would promote development of Russia’s Eastern Siberian oil and gas province by giving Russian oil companies access to markets in Asia-Pacific region.

“The Asia-Pacific region countries account for 28% of the oil consumption in the world. The biggest consumers are China, Japan, Indonesia, South Korea, and India. We understand very well the desire of Russian oil men to enter the promising markets,” Vainshtok said.

With an estimated cost of $11-17 billion and a total length of more than 4,188 km, the undertaking will create Russia’s largest infrastructure project as well as the world’s longest oil pipeline.

Despite the costs, Vainshtok believes his company would not face problems attracting financing for the project. What he neglected to say, however, is that getting the money could involve a little legerdemain.

Sarah Christie and Michiel Hotte of the London Zoological Society make that claim, saying Transneft plans to construct the pipeline in two stages in order to bypass Japanese funding restrictions.

Japanese funding for the pipeline would be provided through the Japan Bank for International Cooperation. JBIC has strict environmental and social guidelines that state that damage to protected areas, endangered species, and vulnerable ecosystems needs to be avoided.

...But environmental threat

A terminal at Perevoznaya would threaten as many as 50 species, among them the endangered Amur leopard. As a result, the pipeline project would have no chance of passing an environmental assessment by any bank from a developed country.

This could change if the terminal at Perevoznaya were built first without the input of international-and therefore more environmentally conscious-money.

“This is what Transneft, Russia’s oil pipeline monopoly, has set out to do,” the two zoologists claim.

They say that the terminal, refinery, 18 storage tanks, railways, and other infrastructure are to be built as quickly as possible. Then, when everything is in place, only marginal environmental damage will result from connecting the new infrastructure to the pipeline.

“In this way,” they say, “Transneft plans to pass the environmental test for securing international investment.”

But Vainshtok denies it, saying Transneft is “willing to start a dialog with all stakeholders; we will talk to every leopard and shrimp in the bay.”