Chinese negotiate for ESPO Daqing oil spur

Russia's Energy Minister Sergei Shmatko said a decision to lay a China-bound spur from the East Siberia-Pacific Ocean (ESPO) pipeline is to be made shortly.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Sept. 22 -- Russia's Energy Minister Sergei Shmatko said a decision to lay a China-bound spur from the East Siberia-Pacific Ocean (ESPO) pipeline is to be made shortly.

"The decision is due soon," said Shmatko, who added that consultations are in progress with the Chinese, who have been seeking a pipeline spur that would extend to the industrial city of Daqing from the border with Russia at Skovorodino.

Meanwhile, Shmatko said the energy ministry had received proposals from oil companies for the maximum rates of transportation tariffs. Shmatko did not detail the proposals, saying only that, "We see rather good opportunities for ensuring the commercial profitability of the ESPO project."

Nevertheless, Shmatko said financing remains an issue.

"The government is still in discussion regarding various forms of financing for this project. We will not leave the company [Transneft] alone with the market. Owing to the market situation, additional measures to finance ESPO will be undertaken," he said.

"If Transneft were to borrow money on the market right now, this would increase expenditures, which would lead to an increase in tariffs. We will provide the company with financial support," said Shmatko, who did not detail the level of support that would be provided.

Plans currently call for completion of the first stage of the line, some 2,600 km from Taishet to Skovorodino, in late 2009. Construction of the 2,100 km second stage, from Skovorodino to Kozmino, will begin after the launch of the first stage.

Contact Eric Watkins at hippalus@yahoo.com.

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