BELARUS NEWS AND ANALYSIS

DATE:

13/04/2007

Russia Announces Plans to Build Pipeline Bypassing Belarus and Poland

MosNews

Russian Industry and Energy Ministry wants to build the second leg of a new oil pipeline to Europe bypassing Belarus and Poland in order to reduce Russia's dependence on transit countries, the ministry's press service said on Thursday, April 12.

MosNews has reported of an oil and gas pricing row with Belarus, which led to suspension of Russian crude supplies to Europe in the beginning of 2007 and undermined Russia's reputation as a reliable oil and gas exported.

"A draft project on the construction of the second leg of the Baltic Pipeline System has been introduced to the government," the Industry and Energy Ministry said in a statement that was quoted by RIA Novosti.

The ministry said the proposed pipeline, which will have an annual capacity of 80 million metric tons (588 million barrels), will run from the Russian town of Unecha, near the Belarusian border, to the Primorsk terminal bordering Finland. It will be the second leg of the Baltic Pipeline System, which will pump Siberian oil from Russia to Germany across the Baltic seabed and on to the rest of Europe and the United States.

Simon Vainshtok, head of state-owned pipeline monopoly Transneft, the project operator, earlier said that his company was technically prepared to begin the construction in April.

"The Unecha-Primorsk pipeline leg is designed to increase the Baltic pipeline's annual capacity, which was raised to 74 million tons (542.42 million barrels) last year, and to provide stable oil supplies to our partners in western Europe," Vainshtok said, quoted by RIA Novosti. He added that the new pipeline would help diversify Russian energy exports.

"We expect to reroute half of the 100 million metric tons (733 million barrels), exported through Belarus, to Primorsk," he said.

The new pipeline will connect Unecha with the oil terminal in the Baltic port of Primorsk though Velikie Luki, allowing Russia to stop pumping oil to Europe via the Druzhba (Friendship) pipeline. It would also increase the capacity of the port at Primorsk to 150 million tons (1.1 billion barrels) per year.

The Druzhba (Friendship) pipeline extends for almost 2,000 kilometers (1,300 miles) across Belarusian territory and pumps on average up to 80 million tons of Russian oil per year to Germany, Poland and Ukraine.

Russia halted deliveries to Europe via the pipeline on Jan 7, saying Belarus was illegally tapping oil following a tit-for-tat price and tariff dispute.

Belarus imposed a transit levy of $45 per metric ton of crude after Moscow doubled the price of natural gas and introduced a duty on oil supplies to Belarus as of Jan 1.

The interruption in supplies affected Germany, Poland, Hungary, the Czech Republic and Slovakia, and further damaged Russia's reputation as a core energy supplier to Europe following a similar energy row with Ukraine involving natural gas this time last year.

Russia agreed to resume supplies after receiving a Belarusian government resolution abolishing the transit levy on Europe-bound Russian oil.

Russian President Vladimir Putin said Feb 1 that the country would look for ways to reduce its dependence on transit nations for its oil and gas exports to Europe.

Transneft vice president Sergei Grigoryev told Russia's Kommersant daily that it could take a year and a half to put the second leg of the Baltic Pipeline System online. Industry experts estimate that the new branch would cost $2-2.5 billion, the paper said.

Source:

http://www.mosnews.com/money/2007/04/13/pipelinenew.shtml