Russia seeks new oil export routes

by Reuters

Russia served notice to former satellites Belarus and Lithuania on Tuesday of its determination to bypass them in bringing its oil to European customers.

The world's number two oil exporter is speeding plans to build an export pipeline to the Baltic port of Primorsk, Semyon Vainshtok, the head of Russian pipeline monopoly Transneft said at an industry conference here.

The new route would avoid Belarus which incensed the Kremlin last month by imposing a transit duty on Russian crude in retaliation for Moscow's decision to end fuel subsidies.

The dispute halted Russian oil supply to Europe through Russia's main export artery, the Druzhba (Friendship) pipeline.

"Eighteen months is way too long," said Vainshtok when asked how long it would take to build the 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," Vainshtok told a conference in London, referring to Transneft's quick work on previous projects.

Vainshtok also raised the prospect that a pipeline spur to Lithuania's Mazeikiu refinery, closed since August, may never reopen. Transneft has said it suspended supplies to Mazeikiu and the Butinge export terminal because of a leak.

Analysts have said the stoppage was the Kremlin's response to Vilnius allowing Polish company PKN Orlen to buy the refinery, which several Russian oil firms had been eyeing.

"Theoretically supplies could be resumed after March, maybe in April," he told reporters at the conference, part of the annual IP Week oil industry gathering in London.

"We will assess the economic viability of the required work. It could be that the work will be too serious and we'll decide against doing it at all," he added.

Russia earlier shut its Latvian pipeline after a political row and analysts said it might do the same to Lithuania.

The idea for the new Baltic pipeline emerged a month ago after the dispute with Belarus halted Russian oil flows across Belarus to Germany, Poland, Hungary, Slovakia and the Czech Republic. Transneft is already working on the project and allocated drilling equipment for it, Vainshtok said.

"We're doing some preliminary work on the project at the moment. The work is employing 900 people," he said.

It should be near completion in March next year, when Russia chooses a successor to President Vladimir Putin.

Putin has said Russia must escape "parasite" countries that act as transit routes for its energy exports.

Moscow's dispute with Minsk was the latest in a series of rows sparked by Russian demands for higher fuel prices.

The dispute prompted unease in the West.

After Moscow resumed supplies along the Druzhba via Belarus, Transneft suggested building a pipeline spur to Russia's Baltic port of Primorsk, which already ships about 1.5 million bpd.

The project, which could boost shipments from Primorsk to 2.5 million bpd, was cleared by the 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.

Analysts have said Russia's Druzhba pipeline to Europe will stay idle after the spur to Primorsk is built. But Vainshtok said Druzhba would still ship some oil.

"I think oil companies will have the choice of whether to go to Druzhba or Primorsk," he said. "We are not saying that we are going to close Druzhba. No way."