Russia getting ready to refuse foreign transit

"By the end of the year the Baltic pipeline system will reach the capacity of 50 million tons annually," Semyon Vainshtok, president of the pipeline operator Transneft, said recently in an interview with the business daily Kommersant.

"The current capacity of 42-46 million tons the pipeline will reach in late August. But to increase it to 50-62 million tons annually we will need $1.9 billion. The sum covers construction of numerous facilities, including five oil pumping stations and two new terminals in Primorsk", he said. He did not conceal that "expansion of the existent pipeline network to pump additional oil volumes to Primorsk will cost another $1 billion".

"The growth of output with lack of export capacity on the background will in the long run lead to introduction of export quotas," Vainshtok believes. Among companies that are trying to solve the problem on their own, he named Rosneft, that is looking a step ahead and is building its own oil loading racks, not linked to oil refineries.

"This year we [Transneft - A.O.] will increase pumping to Russian refineries up to 212 million tons. From there oil is exported by railways", he said.

When assessing the outlook of the pipeline Baku-Tbilisi-Ceyhan, now under construction, Vainshtok pointed out that Transneft was eyeing the project, but "I do not think the pipeline will be built as soon as its participants claim. But even if it is, it will carry only 2.5 million tons of oil annually. Not too much," he emphasized.

At the same time, Transneft is a negotiator and participant of the Kiyikoy -Ibrikhaba pipeline project, but will not finance it. "Most probably, we will be offered to be operators of the route. Its designed capacity is 50-60 million tons annually. We are negotiating construction of this branch with the Turkish party and have made significant progress. But we need to study the question more thoroughly".

The project Kiyikoy-Ibrikhaba is interesting for Russia first of all because it will allow bypassing the Bosporus strait, which has long been the bottleneck in Russian oil exports.

"We cannot allow the Turkish party to toughen the already hard requirements on tankers passing the Bosporus after the pipeline is finished. As the Turkish authorities have limited tanker traffic in the strait at night, oil producers and traders lose about $12 per ton because of delays. If the situation does not improve, increased output of oil exported via the Black Sea ports will not be of any good," Transneft's CEO pointed out.

He also spoke of the urgent need to "get rid of transit dependence". "Russia has a unique opportunity not to depend on anyone in oil shipment. We have access to the Pacific, the Arctic, the Black Sea and the Baltic Sea. Then why use transit?" he argues.

Transneft is going to help eliminating the country's transit dependence by carrying out the project of the North oil pipeline, Vainshtok explained. The company is considering "sites in the Nenets autonomous area, the settlement of Indiga and on the Svyatoi Nos cape, working with sailors and research institutes that have information on navigation in the region". This route will be "more attractive for Russia than Baku-Ceyhan", he believes.