Baltic Pipeline System (BPS)
The BPS came online in December 2001 carrying crude oil from Russias West Siberian and Timan-Pechora oil provinces westward to the newly completed port of Primorsk in the Russian Gulf of Finland.Throughput capacity at Primorsk has been steadily increased, reaching around 1.2 million bbl/d by September 2005. The BPS gives Russia a direct outlet to northern European markets, allowing the country to reduce its dependence on transit routes through Estonia, Latvia, and Lithuania. Unfortunately for the Baltic countries, the growth of the BPS has come at considerable cost, as Russian crude which traditionally moved through the Baltic region has been re-routed through the BPS. For example, crude oil shipments have dropped off almost 30 percent since 2000 at the port of Ventspils in Latvia. Russian authorities have stated publicly that when allocating the countrys exports, precedence will be given to sea ports in which Russia has a stake over foreign ones; in other words, BPS over other Baltic ports.
A new pipeline and deepwater tanker terminal in the Barents Sea would carry crude oil from Russias West Siberian Basin and Timan-Pechora basin westward to Murmansk on the Barents Sea. Such a terminal would allow for 500,000 bbl/d of Russian oil exports to reach the United States via tankers within only nine days travel time, much faster than shipping from the Middle East or Africa. Liquefied natural gas (LNG) facilities at Murmansk and Arkhangelsk (to the southeast) also have been suggested, possibly allowing for natural gas exports to American markets. Despite support for the Murmansk proposal from Russian oil companies, American oil companies, and the U.S. government, Transneft (and thereby the Russian government) has approached the project with caution. In January 2005, Transneft was considering a shorter western route with a terminus at Indiga instead of Murmansk, and Transnefts CEO plainly said the Murmansk proposal had no future. Alekperov also said publicly that he believed the Murmansk project was no longer economically feasible and had not gained support from foreign or Russian private investors. At a cost of $6 billion, the new Indiga proposal is closer to the Timan-Pechora oil fields than the Murmansk pipeline. Building the pipeline to Indiga, where in contrast to Murmansk the port is iced over during the winter, will still not happen anytime soon. Because the Russian government has given priority to the construction of the Taishet- Nakhodka pipeline, Transneft is reluctant to take on two large pipeline projects at the same time. Some Transneft officials and others have stated that Russias expanding BPs system as well as a few other key export projects will be sufficient to keep pace with growing Russian oil production.
Reversal of the Adria pipeline, which spans between Croatias port of Omisalj on the Adriatic Sea and Hungary , has been under consideration since the 1990s. The pipeline, which was completed in 1974, was originally designed to load Middle Eastern oil at Omisalj, then pipe it northward to Yugoslavia and on to Hungary. However, given both the Adria pipelines existing interconnection with the Russian system, and Russias booming production, the pipelines operators and transit states have since considered reversing the pipelines flow, thus giving Russia a new export outlet on the Adriatic Sea. Connecting the Adria pipeline to Russias Southern Druzhba system would require the cooperation of six countries (Russia, Belarus, Ukraine, Slovakia, Hungary, and Croatia). In December 2002, these countries signed a preliminary agreement on the project. Since then, however, progress has been slow moving, while the transit states wrangle over the projects details (including tariffs and environmental issues). Of the six partners, only three countries, Slovakia, Hungary, and Ukraine are fully ready to implement the reversal. Croatia is particularly worried about the environmental effects of increased oil transports from a port along its coast. The Croatian government rejected the conclusions of an environmental impact study completed in October 2005, calling it incomplete and not based on expert knowledge. The rejection of the studys findings could keep the project from ever getting underway. Given the relative simplicity of reversing the flow should the countries come to an agreement, some analysts expect that the Adria pipeline could begin transiting roughly 100,000 bbl/d of Russian crude in the first year of reversal (less than 3% of Russian crude oil exports), with an ultimate capacity of approximately 300,000 bbl/d.
For about two years, Russian energy officials were unwilling to commit to one of two oil transit pipelines to eastern Asia. Finally, in late 2004, President Putin announced that Russia would commit to building a pipeline route from the Russian city of Taishet to Perevoznaya Bay. More recently Putin and Transneft officials have clarified that the 2,500-mile pipeline will be build in two stages, initially to the Pacific coast where a new export facility is to be constructed. Russia estimates that the project will cost between $11.5 and $18 billion; and it will have a capacity of 1.6 million bbl/d. The first stage of the pipeline to Skovorodino will cost around $6.6 billion; Transneft plans to borrow $5 billion through issue of Eurobonds and $1.6 billion through bank credits. Putin and Transneft have made the completion of the first stage a top priority and aim to have that stage of the pipeline constructed by late 2008. Oil would be shipped via rail to the Pacific coast until the second stage of the pipeline is constructed.
The route to Perevoznaya Bay is significantly more expensive than an alternative route to Daqing, China, since it covers a greater distance and involves more investment. However, the Taishet-Perevoznaya Bay route will open up a new Pacific port from which Russian oil exports could be shipped by tanker to other Asian markets and possibly even to North America. Although the Daqing option has been abandoned, it is still possible that China will import oil via the Perevoznaya route. Russian officials and Transneft executives reported in January 2005 that the Perevoznaya route would include a pipeline spur from Skovorodino (located about 30 miles from China).
Some hurdles exist to the Eastern Pipelines plan. First, financing the project is challenging. Russia has only obtained Japanese promises of $7 billion for the project. Also, the pipeline route passes close to the waters of Lake Baikal, a UNESCO-protected site, and environmental hurdles should therefore be expected. Perevoznaya Bay is also an environmentally sensitive area for whales and environmentalists have urged the terminus be closer to the industrial port of Nakhodka. Finally, the government estimates that transportation tariffs could be roughly $6 per barrel, but other outside analysts estimate the level at up to $10 per barrel. It is also possible that the level of development of Eastern Siberian oil resources will not be sufficient to fill the pipeline to capacity by 2020.