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Sberbank Loans Transneft Billions For East Siberia Pipeline Deal

The pipeline is slated to pump up to 80 million metric tons of crude a year (1.6 mln bbl/d) from Siberia to Russia's Far East, which will then be exported to the Asia-Pacific region, in particular energy-hungry China.
by Staff Writers
Moscow (RIAN) May 25, 2006
Sberbank has approved a credit line of 65 billion rubles ($2.4 billion) for Transneft to build a $11.5-billion pipeline from East Siberia to the Pacific Ocean, a bank news release said Wednesday.

Russia's state-controlled savings bank said it had provided the six-year loan to the state pipeline monopoly, because the project met Russia's strategic economic interests.

"The loan will finance the first stage of the East Siberia - Pacific pipeline project," the news release said.

The bank said the pipeline project was both economically efficient and important for the country's economy.

"Sberbank assigns priority to the funding of large-scale projects implemented by Russian companies," the statement said.

On Tuesday, Mikhail Chemakin, the head of Vostoknefteprovod, a company involved in construction of the East Siberia - Pacific Ocean (ESPO) pipeline, said the first three kilometers of the pipeline had already been laid, and that the project would be finished by December 2008.

The pipeline is slated to pump up to 80 million metric tons of crude a year (1.6 mln bbl/d) from Siberia to Russia's Far East, which will then be exported to the Asia-Pacific region, in particular energy-hungry China.

The first stage of the project will connect Taishet in the Irkutsk Region to Skovorodino in the Amur Region in the Far East.

Initially, the cost of the first stage was estimated at $6.5 billion. However, the estimate is being revised after President Putin ordered to reroute the pipeline 40 kilometers (25 miles) away from Lake Baikal, the world's largest fresh water body and a Unesco World Heritage Site, following fervent protests from residents, the local administration, and environmentalists.

Under the original project, the pipeline would have run 800 meters (2,600 feet) away from the lake. The new feasibility study will be ready by the end of the year, Transneft said.

The destination point of the pipeline on the Pacific is to be selected in the fall of 2006. Earlier, it had been Perevoznaya Bay in the Far Eastern Primorye Territory.

Russian pipe producers propose protectionist law

An organization representing Russian pipe manufacturers Tuesday proposed that a law be adopted to force national pipeline projects to use at least 70 percent Russian piping.

Pipelines to deliver Russia's vast oil and gas reserves to consumers across Eurasia are currently a hot topic, with two - one under the North Sea and another one from Siberia to the Pacific Ocean - already under construction in multibillion-dollar projects.

"Our initiative is due to a complicated situation on Russia's pipe market, which is characterized by a lack of equal conditions for competition between foreign and Russian producers," the Russian Pipe Industry Development Foundation's head Alexander Deineko said.

Deineko said his organization's move was aimed at projects like the East Siberia-Pacific Ocean pipeline, which will supply countries in the Asia-Pacific region, as well as the Shtokman gas field off Russia's Arctic coast, which holds an estimated 3.2 trillion cubic meters of natural gas and 31 million metric tons of gas condensate.

Earlier, the Economic Development and Trade Ministry said it was preparing a protectionist resolution because imports of large-diameter pipes, according to the data from the foundation, had grown almost 50 percent in 2004, while domestic sales had risen only 8 percent.

The ministry said it had looked into the import situation following a request from Russia's Pipe Industry Foundation, and found that pipe imports had grown in recent years. Prices for domestic pipes increased faster than those for foreign-made pipes, substantially retarding sales of Russian pipes, the ministry said.

Deineko said Russian pipe companies would be able to satisfy all their clients' demands.

"We have no doubt at all that we are capable of fully satisfying the demands of our clients," he said. "Our pipes will be enough for new projects, for the replacement of old pipes and for modernization of existing capacities."

Source: RIA Novosti

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