MOSCOW. Dec 30 (Interfax) - Diversification of oil exports is a very fashionable and noble pursuit, but not always a simple one, complicated as it often is by environmental, political and other factors. In the past year, one such project ended without ever getting started, the conditions of another were revised, and the launch of a third was postponed until next year.
Better a bad peace
Russia on January 1, 2011 began supplying oil to China along a branch line from the Eastern Siberian-Pacific Ocean pipeline system. Over a period of 20 years, 15 million tonnes of oil are supposed to be shipped along this route annually, with Rosneft (RTS: ROSN) providing 9 million tonnes and Transneft (RTS: TRNF) 6 million tonnes. In exchange, the companies received respectively $15 billion and $10 billion in loans from Chinese banks in 2009.
However, by March it was already clear that the companies were having differences. CNPC decided that it was paying 2-3% too much for the Russian oil and unilaterally decided to underpay on the contract. China requested a review of the price formula. Tense negotiations began, with neither side willing to give ground. China's debt grew, and Russia threatened to turn to the London arbitration court.
At the end of May, China paid about three-quarters of the debt for oil supplies from Russia, but continued to underpay by $3 per barrel.
The companies only managed to resolve the dispute in October, during Prime Minister Vladimir Putin's visit to China. But none of the participants in the negotiations has yet disclosed the essence of the agreements that were reached. "A market solution has been found that reflects the current market parameters," was what was said at the time.
Those in the know say that Russia did after all buckle under and agree to lower the oil price by $1.50 per barrel. All government officials and company representatives have declined to comment on this issue, deflecting it with general statements suggesting something to the effect that it is better to have a bad peace than a good war.
"This is a special art, a special culture to implement such projects on a long-term basis. I think that in 20 years something else could happen. But if we run to a London court every time, nothing good will come of it. Therefore, I am very pleased, both for us and our Chinese colleagues, that were able to resolve this," Energy Minister Sergei Shmatko said.
Burgas against Alexandroupolis
The years-long discussions of the project to build the Burgas-Alexandroupolis oil pipeline, which was supposed to reduce oil tanker shipments via the congested Bosporus and Dardanelles, finally hit a dead end this year, as Bulgaria announced that it would pull out of the agreement signed with Russia and Greece in 2007.
The project had already been stalled for some time, as Bulgaria was constantly finding fault with the environmental impact study and fobbing off its partners, Russia and Greece, with assurances regarding payment of debt for financing the consortium's activities.
Now not only Russian producers can no longer look forward to an additional 35 million-50 million tonnes of capacity per year, but also companies that produce oil in Kazakhstan, as this project was always linked to the expansion of the Caspian Pipeline Consortium, which will apparently have to seek new transshipment routes.
Selling doesn't equal building
Selling oil and oil products turned out to be easier than building a new export terminal. The launch of the second phase of the Baltic Pipeline System (BPS-2), which was planned for December, has been postponed at least by a quarter due to construction problems at Ust-Luga, the terminus of the system. Problems have arisen at Rosneftbunker, which is controlled by oil trader Gunvor.
The project, intended to diversify export routes for Russian oil and reduce transit risks for shipments to European customers, was supposed to ship 20 million tonnes of crude next year. It is already clear that this figure will be at least 25% lower.
Transneft has been appointed to coordinate efforts to resolve the problems that have arisen. The pipeline monopoly completed its part of the project - construction of the pipeline and tank farm - on time. Transneft could ultimately end up as the sole owner of all the facilities of the new pipeline system in order to avoid such surprises in future.
MOSCOW. Dec 30 (Interfax) - Diversification of oil exports is a very fashionable and noble pursuit, but not always a simple one, complicated as it often is by environmental, political and other factors. In the past year, one such project ended without ever getting started, the conditions of another were revised, and the launch of a third was postponed until next year.
Better a bad peace
Russia on January 1, 2011 began supplying oil to China along a branch line from the Eastern Siberian-Pacific Ocean pipeline system. Over a period of 20 years, 15 million tonnes of oil are supposed to be shipped along this route annually, with Rosneft (RTS: ROSN) providing 9 million tonnes and Transneft (RTS: TRNF) 6 million tonnes. In exchange, the companies received respectively $15 billion and $10 billion in loans from Chinese banks in 2009.
However, by March it was already clear that the companies were having differences. CNPC decided that it was paying 2-3% too much for the Russian oil and unilaterally decided to underpay on the contract. China requested a review of the price formula. Tense negotiations began, with neither side willing to give ground. China's debt grew, and Russia threatened to turn to the London arbitration court.
At the end of May, China paid about three-quarters of the debt for oil supplies from Russia, but continued to underpay by $3 per barrel.
The companies only managed to resolve the dispute in October, during Prime Minister Vladimir Putin's visit to China. But none of the participants in the negotiations has yet disclosed the essence of the agreements that were reached. "A market solution has been found that reflects the current market parameters," was what was said at the time.
Those in the know say that Russia did after all buckle under and agree to lower the oil price by $1.50 per barrel. All government officials and company representatives have declined to comment on this issue, deflecting it with general statements suggesting something to the effect that it is better to have a bad peace than a good war.
"This is a special art, a special culture to implement such projects on a long-term basis. I think that in 20 years something else could happen. But if we run to a London court every time, nothing good will come of it. Therefore, I am very pleased, both for us and our Chinese colleagues, that were able to resolve this," Energy Minister Sergei Shmatko said.
Burgas against Alexandroupolis
The years-long discussions of the project to build the Burgas-Alexandroupolis oil pipeline, which was supposed to reduce oil tanker shipments via the congested Bosporus and Dardanelles, finally hit a dead end this year, as Bulgaria announced that it would pull out of the agreement signed with Russia and Greece in 2007.
The project had already been stalled for some time, as Bulgaria was constantly finding fault with the environmental impact study and fobbing off its partners, Russia and Greece, with assurances regarding payment of debt for financing the consortium's activities.
Now not only Russian producers can no longer look forward to an additional 35 million-50 million tonnes of capacity per year, but also companies that produce oil in Kazakhstan, as this project was always linked to the expansion of the Caspian Pipeline Consortium, which will apparently have to seek new transshipment routes.
Selling doesn't equal building
Selling oil and oil products turned out to be easier than building a new export terminal. The launch of the second phase of the Baltic Pipeline System (BPS-2), which was planned for December, has been postponed at least by a quarter due to construction problems at Ust-Luga, the terminus of the system. Problems have arisen at Rosneftbunker, which is controlled by oil trader Gunvor.
The project, intended to diversify export routes for Russian oil and reduce transit risks for shipments to European customers, was supposed to ship 20 million tonnes of crude next year. It is already clear that this figure will be at least 25% lower.
Transneft has been appointed to coordinate efforts to resolve the problems that have arisen. The pipeline monopoly completed its part of the project - construction of the pipeline and tank farm - on time. Transneft could ultimately end up as the sole owner of all the facilities of the new pipeline system in order to avoid such surprises in future.