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Putin unveils final extension of oil pipeline to Pacific
Source: AFP |
December 26, 2012, Wednesday
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RUSSIAN President Vladimir Putin yesterday unveiled the final extension of a new US$25 billion oil pipeline to the Pacific that marks the energy power's gradual shift away from weak European markets.
The East Siberia-Pacific Ocean (ESPO) link is also expected to expand sales to the US and fulfill Putin's dream of cementing Russia's place as a dominant force in international crude markets.
Moscow hopes to turn the price of oil transported through ESPO into a benchmark in the Asia-Pacific region that competes with West Texas Intermediate - the US oil standard whose price some traders believe is too heavily based on domestic political factors.
But analysts worry that Russia may lack enough accessible oil in its underdeveloped East Siberia fields to keep the line fully flowing despite strong demand in China and Japan.
"There is just enough East Siberian oil for the existing pipeline," Sberbank Asset Management energy analyst Valery Nesterov said.
"But expanding this pipeline further would be impossible without West Siberian oil - and that oil is already meant to go west," Nesterov said.
Putin brushed those concerns aside as he joined in the launch ceremony by video link from the Far East city of Khabarovsk.
"By completing the second leg, our potential is expanding," Putin said in televised remarks. "This is a serious event."
The second leg of the 4,200-kilometer pipe runs from fields west of Lake Baikal to the Pacific port of Kozmino near the northeastern edge of China.
The port - previously connected to East Siberian oil fields by rail - also provides Russia with quick access to Japan and South Korea.
But the head of the Transneft state oil pipeline operator said the lion's share of the crude from the final leg would in fact be destined for the US.
"The American market will receive 35 percent of Kozmino oil," Nikolai Tokarev said at the opening ceremony. "Around 30 percent will go to Japan and 28 percent to China."
Russia has repeatedly tried and failed to make meaningful inroads into the US oil and natural gas markets.
Its gas sales never materialized after the North American shale revolution made both Canada and the US effectively self-sufficient.
Analysts note that US oil production is also expanding at rates that should see the country outpace Russia and Saudi Arabia in the next few years.
The East Siberia-Pacific Ocean (ESPO) link is also expected to expand sales to the US and fulfill Putin's dream of cementing Russia's place as a dominant force in international crude markets.
Moscow hopes to turn the price of oil transported through ESPO into a benchmark in the Asia-Pacific region that competes with West Texas Intermediate - the US oil standard whose price some traders believe is too heavily based on domestic political factors.
But analysts worry that Russia may lack enough accessible oil in its underdeveloped East Siberia fields to keep the line fully flowing despite strong demand in China and Japan.
"There is just enough East Siberian oil for the existing pipeline," Sberbank Asset Management energy analyst Valery Nesterov said.
"But expanding this pipeline further would be impossible without West Siberian oil - and that oil is already meant to go west," Nesterov said.
Putin brushed those concerns aside as he joined in the launch ceremony by video link from the Far East city of Khabarovsk.
"By completing the second leg, our potential is expanding," Putin said in televised remarks. "This is a serious event."
The second leg of the 4,200-kilometer pipe runs from fields west of Lake Baikal to the Pacific port of Kozmino near the northeastern edge of China.
The port - previously connected to East Siberian oil fields by rail - also provides Russia with quick access to Japan and South Korea.
But the head of the Transneft state oil pipeline operator said the lion's share of the crude from the final leg would in fact be destined for the US.
"The American market will receive 35 percent of Kozmino oil," Nikolai Tokarev said at the opening ceremony. "Around 30 percent will go to Japan and 28 percent to China."
Russia has repeatedly tried and failed to make meaningful inroads into the US oil and natural gas markets.
Its gas sales never materialized after the North American shale revolution made both Canada and the US effectively self-sufficient.
Analysts note that US oil production is also expanding at rates that should see the country outpace Russia and Saudi Arabia in the next few years.
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