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Wednesday, November 21, 2018

New pipelines for the export of oil from the Former Soviet Union (FSU)

The International Energy Agency (IEA) reports that Transneft announced in late April that one third of the 0.6 million barrels per day (mbd) pipeline being built from Eastern Siberia to Skovorodino on the Chinese border has been constructed. Completion is expected by end-2008, with 50% of deliveries travelling by spur line to China and the remainder likely to be transported by rail to the Pacific coast. Completion of a second phase of the pipeline, taking total capacity to 1.6 mbd, will be dependent upon exploration successes in Eastern Siberia.


The graphs below show that the biggest increase in exports from the Former Soviet Union has been from the Baku-Tblisi-Ceyhan pipeline (and also Other Routes). However, Kazakh oil production is seen to be levelling off in 2007 at 1.34 mbd, despite modestly higher output from the Tengiz and Karachaganak fields. The country’s Energy Ministry, on the strength of first quarter (1Q) performance, revised expected 2007 production up by 3%. Maintenance work assumed for July-September potentially accounts for the flatter 2007 profile. Export and processing capacity remain a potential constraint on future Kazakh growth.


Russian pipeline monopoly Transneft took over Russia’s 24% stake in the 0.7 mkd, 1,510-km Caspian Pipeline Consortium (CPC) pipeline from Tengiz to Novorossiysk, which moves much of Kazakhstan’s oil output to western markets. Russia has long blocked a doubling of CPC capacity, arguing for higher pipeline tariffs and progress on a Turkish Straits bypass to ease shipping bottlenecks. Operators of Kazakhstan’s much-delayed Kashagan project are now seeking alternative export routes before the field comes online at the turn of the decade. When all phases of the pipeline have been completed, the maximum throughput of the CPC pipeline system will reach 67 million tons of oil per year.



Associate Press (AP) reports that Turkey began constructing a new oil pipeline in April that is expected to carry Russian and Kazakh oil from its Black Sea coast to the Mediterranean, another move towards making Turkey a global energy corridor. The USD 1.5bn pipeline is expected to connect the Black Sea port city of Samsun to the Mediterranean oil hub of Ceyhan — the end point of two existing major oil pipelines carrying Caspian oil from Baku, and Iraqi oil from Kirkuk. The 550-kilometer (340-mile) pipeline is scheduled to be operational by 2009 and will alleviate tanker traffic congestion through the Bosporus Strait - a serious concern for Turkey, which fears a catastrophic accident in the narrow waterway bisecting Istanbul, the country's largest city. The pipeline competes with another project by Russia, Bulgaria and Greece to construct an oil pipeline, dubbed Burgas-Alexandroupolis, which would also bypass the Turkish-controlled Bosporus.


Moscow has also produced a draft resolution for the construction of Baltic Pipeline System-2 (BPS-2). The proposal envisages a 1,200 km, one million barrels per day pipeline from the Belarus border to the port of Primorsk, which would be developed to handle 160,000 metric tonne tankers. The planned new 50m tonnes per year oil pipeline will allow Russia to reduce its dependence on its other neighbour, Belarus. The new 1,200-kilometre route, linking the existing Druzhba pipeline at the Unecha station with the Primorsk export terminal could be ready in some 18 months.


Contact: Erik Ranheim