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.