Russia » Economics
Author`s name Michael Simpson

Pipeline Statistics

Russian oil producers may increase export of oil
Last week Transneft President Semyon Vainshtok acted as a super-efficient manager. He persuaded Russia President Vladimir Putin that Russia didn't need any longer more pipeline infrastructure for oil export. In other words, oil producers may continue increasing the oil production as they won't face a problem which they had at the beginning of the year: because of technical problems Russian oil producers had to reduce the export. According to Semyon Vainshtok, the Transneft carrying capacity has increased by 25 million tons this year. At that, 6 million tons fall on the second stage of the Baltic pipeline system launched in July; and the rest 19 million tons are the result of mixing heavy oil and light crude along the Kholmogory – Klin sector of the pipeline.

Indeed, the second stage of the Baltic pipeline system is operating at its full capacity. As for the Khlmogory – Klin sector, the increase in oil pumping makes up only 1 million of tons. It is unlikely that it may further increase even more as it wouldn't be advantageous for oil companies using the sector of the pipeline system for transportation of light sweet crude (these are Sibneft, TNK, LUKOIL and Rosneft). What is more, if the oil quality in this sector gets worse, this will inevitably demand modernization of the oil refineries operating in the Russian cities of Volgograd, Tuapse and Krasnodar. This would be highly disadvantageous for LUKOIL and Rosneft.

Transneft promises to increase the carrying capacity of the Baltic pipeline system by 12 million tons more by the end of the year and by the same amount - in spring of 2004. However, this is not quite enough: according to Russia's Vice-premier Viktor Khristenko, the oil production increased by 20 million tons over six months of the year, but export increased by 16 million tons over the same period. By the end of the year the export demand may increase by not less than 32 million tons. However, Transneft will be able to guarantee pumping of this volume only by next spring when the carrying capacity of the Baltic pipeline system increases up to 42 million tons.

For the time being, the Transneft system is used for deliveries to Russian oil refineries from where companies export oil in railway tank-wagons. YUKOS Chairman of board Semyon Kukes says that last year oil export from oil refineries via railway made up 15.7 million tons but this year it will exceed 20 million tons. On the whole, about 10 million tons of oil per quarter are exported through other ways alternative to Transneft.

Railways are really very helpful for oil producers. But if the oil price drops below $20 per barrel, railway oil supplies will be uneconomic for majority of oil refineries in Russia and oil producers will focus the export potential upon Transneft. What will then Semyon Vainshtok report to Russia's president?

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