Russia plans to start extending ESPO line in 2011

Russia’s oil pipeline monopoly OAO Transneft plans to start lengthening the East Siberia–Pacific Ocean (ESPO) oil pipeline in 2011, with completion set for 2013.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 26 -- Russia’s oil pipeline monopoly OAO Transneft plans to start lengthening the East Siberia–Pacific Ocean (ESPO) oil pipeline in 2011, with completion set for 2013.

As part of the project, Transneft expects to construct a total of five new pumping stations: four in the republic of Sakha (Yakutia) and one in the Amur region.

Transneft also plans to construct four reserve subsea lines through four rivers—the Lena, Amga, Aldan, and Nyuya—in order to reduce pressure and increase the safety of the line’s operations.

The first phase of the ESPO project, launched last December, extends from Taishet in the Irskutsk region via the republic of Yakutia to Skovorodino in the Amur region.

The second phase of ESPO construction will extend the line from Skovorodino to Kozmino Bay on Russia’s Pacific Coast. Until completion of Phase 2, ESPO oil exports will be carried by rail from Skovorodino to Kozmino.

The pipeline, operated by Transneft, is intended for the export of Russian oil largely to the Asia–Pacific.

Russia began selling its new ESPO Blend crude from the port of Kozmino in late 2009, and most buyers of the medium-heavy sweet grade are trading companies as well as refiners in South Korea, China, and Japan.

According to traders, who cited a final export schedule, Transneft plans to boost exports of ESPO oil in April by 7.9% on a daily basis from March to 1.3 million tonnes.

The new Russian supplies piped along the ESPO already are said to be causing problems for other producers, including those in the Organization of Petroleum Exporting Countries.

Due to increased Russian throughput, according to Shokri Ghanem, head of Libya's delegation to the Organization of Petroleum Exporting Countries, the organization now has less room to raise production as global oil use recovers.

"If it is increasing the production, this means increasing the world supply," Ghanem told Reuters.

"Of course this will cut the share of OPEC to increase its production because they don't want to cut down their production, so we'll end up in some problems," Ghanem said of rising ESPO output.

However, that view was contested by Saudi Oil Minister Ali al-Naimi, who said that OPEC members don't see any threat in the growing volume of oil exports from Russia to the Asia-Pacific via the ESPO line.

When asked about crude exports via the ESPO line, al-Naimi said, "We're not worried about that, since we have the world's largest oil reserves and the world's largest production capacities. We are capable of competing with any country."

Earlier this month, ExxonMobil Corp. and Mitsui & Co.—each said to be buying 730,000 bbl—became the latest in a growing list of purchasers of crude oil delivered by the ESPO line (OGJ Online, Mar. 1, 2010).

Contact Eric Watkins at hippalus@yahoo.com.

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