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/ January #1
/ Talakan Oil Flows into the Pacific The long-awaited launch of the first stage of the Eastern Siberia – Pacific Ocean (VSTO) oil pipeline took place on Dec. 28
№ 1 (January 2010)
Talakan Oil Flows into the Pacific The long-awaited launch of the first stage of the Eastern Siberia – Pacific Ocean (VSTO) oil pipeline took place on Dec. 28
The idea of building a pipeline that would link Russia’s Siberian oilfields with the Pacific Ocean coast existed even in the Soviet days. However, it took more than three decades from dotting the future trunkline’s route on a project map to loading first oil onto a tanker in the Kozmino Bay.
Meanwhile, the Soviet Union ceased to exist and the fast-paced development of southeast Asia tremendously spurred oil demand in the region. The emergence of Asia as one of the global leaders in oil consumption justified the implementation of a project often compared in scale with the construction of the Baikal-Amur railway.
In late December, the first tanker carrying East Siberian crude sailed out of the special-purpose marine port of Kozmino in Russia’s Far Eastern Primorsky Territory. The project’s first stage envisages transportation of oil from Taishet in the Irkutsk region, via a 2,700-kilometer-long pipeline, to Skovorodino railway station in the Amur region, where the crude is loaded into tank cars and carried by train to its final destination, the Kozmino port. The scope of the project is impressive – according to Transneft President Nikolai Tokarev, the first stage of construction cost approximately 420 billion rubles ($9.54 billion). Of those, some 350 billion rubles were spent to build the Taishet-Skovorodino section, 60 billion rubles – to construct the Kozmino marine port, and 6 billion rubles – to erect an oil-loading terminal in Skovorodino, Tokarev told Kommersant.
Bonus for Exporters
The importance of the new project for the national economy was highlighted by the Russian government’s Dec. 1 decision to annul the export duty on oil produced at 13 oilfields in Eastern Siberia. By doing so the Cabinet confirmed its commitment to stimulate oil producers operating in the region. “All oil produced in Eastern Siberia will be exported,” Russia’s Energy Minister Sergei Shmatko told reporters after the measure went into effect.
The annulment had been planned earlier and the producers’ reaction was quick – even before the duty was officially scrapped the companies had invested over $10 billion into developing East Siberian fields and building infrastructure in a frontier region with a harsh climate.
In August, Rosneft launched production at the Vankor field in the Krasnoyarsk Territory. Bringing Vankor onstream was a key project for securing the resource base that would supply crude to fill the Pacific-bound pipeline. By November, Rosneft invested some 200 billion rubles in field developement here, with another 100 billion rubles already earmarked for next year. Another important milestone was the completion of the oil pipeline linking the Vankor field with the village of Purpe in the Yamal-Nenets Autonomous DIstrict – in early May the workers welded the “golden joint” of a new pipeline which will carry the Vankor-produced crude to Transneft’s national oil pipeline grid.
Another prospective supply source for VSTO is the Verkhnechonskoye field, jointly developed by Rosneft and TNK-BP. Commercial oil production started last year and 2008 also saw the completion of the 85-kilometer pipeline linking the field with the VSTO trunkline.
The third large field, Talakan, is developed by Surgutneftegaz. In early October 2008, a 1,100-kilometer section of the Pacific-bound pipeline (Talakan – Ust-Kut – Taishet) was launched in reverse, marking the start of the commercial oil production at the Talakan oil and gas condensate field. In late June 2009, Surgutneftegaz started commercial production at another East Siberian field, Alinskoye, located in the province of Sakha-Yakutia. According to Surgutneftegaz first deputy general director Anatoly Nuryayev, Alinskoye is expected “to provide substantial support to production at Talakan.” And while this year the output at Alinskoye won’t top several dozen thousands of tons, Surgutneftegaz planned to finish 2009 with over 1.9 million tons produced at its Eastern Siberian fields.
Rosneft also wants to back up its production at Vankor and regards its Yurubcheno-Tokhomskoye oil and gas condensate field as a perfect choice, planning to link it with Taishet via a 600-kilometer pipeline in 2013. On parallel tracks Rosneft is going to build the necessary infrastructure, carry out preparatory work and drill production wells.
Design throughput capacity of the first stage of VSTO is 30 million tons per annum. According to Tokarev, in 2010 the pipeline will ship half of that amount, with the crude coming from Talakan and Verkhnechonskoye fields, which at this stage can jointly contribute 7 million tons per annum, and the Vankor field, slated to produce around 12-13 million tons.
Getting Bigger, Reaching Further
The construction of the second stage of the VSTO pipeline is scheduled to start in early 2010 and finish in 2012, says Tokarev. After its completion the throughput capacity will rise to 80 million tons per year. The cost of construction is estimated at approximately 350 billion rubles and will cover the construction of the Skovorodino – Kozmino leg, as well as the installation of additional booster stations along the Taishet – Skovorodino section.
Despite ongoing discussions questioning the sufficiency of the East Siberian crude supply base, the Transneft chief believes that scrapping the export duty (by the way, the list of “privileged” East Siberian fields is likely to grow) will contribute to making “the pipeline-filling prospects even more optimistic than before.” By the time Talakan, Verkhnechonskoye and Vankor fields hit their projected peaks of output, the pipeline will also be filled with West Siberian crude via the Samotlor – Purpe pipeline, currently built by Transneft.
“It’s still too early to talk about Stage 2 of VSTO. In my opinion, that project will be completed no sooner than 2013, with 2014 looking like a more feasible target,” Otkrytie financial company analyst Natalia Milchakova told Oil&Gas Eurasia. “At the same time, regional resources are quite sufficient to fill the pipeline at Stage 1 – many fields, such as Rosneft’s Yurubcheno-Tokhomskoye, Slavneft’s Kuyumbinskoye, Gazprom Neft’s Vakunaiskoye are still to be brought onstream. Clusters of large deposits are dotting the Krasnoyarsk Territory, Irkutsk Region and Yakutia. Also, the pipeline can carry oil from West Siberia.”
According to Alexander Pavlov, deputy director of the Government Policy and Regulation Dept. for Geology and Subsoil Use at Russia’s Natural Resources Ministry, the Stage 2 supply base relies on the growth of new reserves at main and satellite fields and development of the blocks slated for licensing in the near future (so far these blocks have been appraised only for perspective resources).
“Besides that, another important factor for providing the VSTO supply security at both Stage 1 and Stage 2 is the development of the Vankor center of the Bolshehetskaya zone of West Siberian platform, located in the northwestern part of Krasnoyarsky Territory. The oil produced there is expected to be another source of supply to the VSTO pipeline,” Pavlov told OGE.
Bridging the Amur
In the not so distant future East Siberian oil will reach foreign markets not only by sea, but by land, too. According to an intergovernmental agreement signed by Moscow and Beijing, Russia will start shipping crude across the Chinese border in early 2011. The deliveries will be made via a VSTO spur, jointly built by Transneft and CNPC. In February, China’s China Development Bank agreed to provide $25 billion in loans to Rosneft and Transneft. Of those, the Russian oil producer will receive $15 billion against the pledge to ship 15 million tons of crude each year over a 20-year period, while the oil transport monopoly will spend its $10-billion share to complete the VSTO project.