BELARUS NEWS AND ANALYSIS

DATE:

13/02/2007

Russia sees Belarus oil bypass by mid-2008

By Tanya Mosolova and Alex Lawler

LONDON, Feb 13 (Reuters) - Russia may take less than 18 months to build an oil pipeline that would bypass Belarus and expand reliable shipments direct to Europe from Russia's Baltic coast, the head of pipeline monopoly Transneft said on Tuesday.

"Eighteen months is way too long," Transneft's head Semyon Vainshtok told a conference in London, in answer to a question about the time needed to build the new pipeline, which could eventually pump one million barrels per day.

"If a government decision is taken, the timeframe of the construction will be very tight, even by Transneft's standards," said Vainshtok, referring to the speedy implementation of some of Transneft's (TRNF_p.RTS: Quote, Profile , Research) previous projects.

The idea for the project emerged one month ago after an oil pricing dispute between Russia and Belarus briefly halted supplies of over one million bpd of Russian crude to Germany, Poland, Hungary, Slovakia and the Czech Republic via Belarus.

The oil dispute with Minsk was the latest in a serious of pricing oil and gas disputes between Russia and its neighbours, which were severely criticised in the West and prompted European leaders to urge supply diversification.

After resuming supplies through Belarus, Transneft suggested building a pipeline spur to Russia's Baltic port of Primorsk, which is already exporting some 1.5 million bpd of Russian crude.

The project was cleared by Russia's energy ministry and is awaiting government approval.

"If the decision is made it will only be taken to protect our European partners, the end-users of oil. Russia is demonstrating that it is a reliable supplier of oil to the Western markets," Vainshtok said.

Transneft has yet to value the project's costs and some analysts have said the financial burden might be very heavy for the company, which also has to spend some $11 billion on Russia's first pipeline to Asia before 2009.

But the state, which is awash with cash from record oil, gas and metals prices, may support the project as it has so far supported all plans to cut dependence on transit states.

Vainshtok said his company would be able to fund both projects by increasing foreign borrowing. Transneft is currently planning a benchmark 7-year Eurobond in U.S. dollars.

During his six years as the head of Transneft, Vainshtok has built bypasses around Ukraine and the troubled Russian region of Chechnya and a pipeline to the port of Primorsk, allowing Russia to cut oil transit via Latvia and Estonia.

Many analysts have said the Russian pipeline to Germany, Poland and other European states, known as the Druzhba ("Friendship") pipeline, will stay idle after the spur to Primorsk is built.

But Vainshtok said some volumes would be left for shipment via Druzhba. He did not elaborate.

Source:

http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2007-02-13T114959Z_01_L13149524_RTRIDST_0_RUSSIA-TRANSNEFT-PIPELINE-UPDATE-1.XML&rpc=66&type=qcna