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Putin inaugurates Siberia-Pacific oil pipeline to export crude to the U.S. and Asia

KHABAROVSK, Russia -- Russian President Vladimir Putin unveiled the final extension of a new $25 billion oil pipeline to the Pacific that underscores the energy power’s gradual shift away from stagnant European markets.

The East Siberia-Pacific Ocean (ESPO) link is also expected to expand sales to the U.S. and fulfill Putin’s dream of cementing Russia’s place as a dominant force on international crude markets.

Moscow hopes to make ESPO into a benchmark in the Asia Pacific region that competes with the West Texas Intermediate (WTI) — the US oil standard whose price some traders believe is too heavily based on domestic political factors.

However, analysts worry that Russia may currently lack enough accessible oil in its underdeveloped East Siberia fields to keep the line fully flowing despite strong demand in China and Japan.

Putin brushed those concerns aside as he joined in the ribbon-cutting ceremony by video link from the far east city of Khabarovsk. “By completing the second leg, our potential is expanding,” Putin said in televised remarks. “This is a serious event,” he said.

The second leg of the 4,200 km pipeline runs from fields west of Lake Baikal to the Pacific port of Kozmino near the northeastern edge of China. The port — previously connected to East Siberian crude by rail — also provides Russia with quick access to Japan and South Korea.

However, the head of the Transneft state oil pipeline operator said most of the crude from the final leg would in fact be destined for the US.

“The American market will receive 35% of Kozmino oil,” Nikolai Tokarev said at the opening ceremony in comments reported by the company’s web site.

“Around 30% will go to Japan and 28% to China. The rest will go to Singapore, Malaysia and South Korea,” he said.

Russia has repeatedly tried and failed to make meaningful inroads on the U.S. crude and natural gas markets. Its gas sales never materialized after the North American shale revolution made both Canada and the US effectively self-sufficient.

Analysts added that U.S. oil production is expanding at rates that should soon see the country outpace Russia and Saudi Arabia in the next few years.

However, Tokarev appeared to be placing his bets on this region as he laid to waste the idea of offering Europe any assurances that the continent could continue to rely on Russian oil.

“We do not owe a single EU country a thing, and we certainly are not obligated to account for ourselves,” RIA Novosti quoted Tokarev as saying.

“If they [EU nations] want to hold a normal, proper conversation, they should change their approach to such a dialogue,” he said.

12/26/2012

 

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