ECONOMY

Russia’s Transneft says private ports a concern

MOSCOW – Russian pipeline monopoly Transneft will prioritize oil shipments via sea ports over pipeline exports to Europe, but is concerned that most Russian sea terminals are privately controlled, its head told Reuters. «If there is free capacity – as we have now in (the Black Sea port of) Novorossiisk – we should fully use it,» Nikolai Tokarev said in an interview. «Why should we give crude away to other places, for example abroad, if we can use our own potential?» he said in remarks cleared for publication yesterday. Tokarev took over in October from Semyon Vainshtok as head of the world’s largest pipeline network. Vainshtok expanded ports and built a new outlet on the Baltic Sea, Primorsk, which became Russia’s largest. Vainshtok also gradually reduced exports via the Soviet-era Druzhba («Friendship») pipeline to Central Europe. Oil firms say seaborne shipments are often much more profitable. Tokarev supported the strategy but was concerned sea ports’ loading facilities are often privately held. «The state has very limited ability to control exports via sea terminals from start to finish,» he said. «Their private owners can decide any moment to resell them or hold an IPO. They can change priorities to export sunoil instead of oil, for example, or fully close down facilities to avoid investing money.» Tokarev’s remarks about an IPO, or initial public offering, referred to Novorossiisk, Russia’s largest Black Sea oil port, whose owners raised $1 billion in November by floating a fifth of its stock in London. The Russian state owns 20 percent in the port while the firm’s Chairman Alexander Ponomarenko and parliamentary deputy Alexander Skorobogatko hold control. Expanding the system Tokarev said Transneft will focus on top investment projects, expanding its pipelines to the Baltic Sea and a new link from Bulgaria to Greece to bypass the Bosporus. The idea to expand the Baltic system emerged this year after Belarus suspended flows via Druzhba to Poland and Germany over a pricing dispute with Moscow. Some officials have suggested Russia may fully shut down Druzhba at some point. Tokarev said this scenario was unlikely, but predicted that logistics would change and Russian oil firms will gradually stop using intermediaries like Sunimex in Germany or J&S in Poland. «Frankly, it makes sense for oil firms to have direct deals with consumers in countries where supplies go,» he said. Primorsk exports 1.5 million barrels per day (bpd) and the Baltic expansion should allow either Primorsk or neighboring Ust-Luga supply an extra 1 million bpd. The government will decide on the final destination in early 2008 after both options are studied. Construction of the 700,000-bpd Bulgaria to Greece pipeline, known as Burgas-Alexandroupolis, can start in late 2008 or early in 2009 and will take 12-18 months: «The optimistic scenario is to launch the pipeline at the end of 2009 or in 2010,» he said. By that time, Transneft expects the Caspian Pipeline Consortium (CPC), which pumps oil from Kazakhstan across Russia, to expand to 1.3 million bpd from the current 700,000 bpd. «The aim is to synchronize the launch of Burgas-Alexandroupolis with the CPC expansion,» said Tokarev, adding that CPC has committed to supply some 340,000 bpd to the Bulgarian-Greek pipeline. Russia had opposed CPC’s expansion, saying it would pressure the congested Turkish straits, but Kazakh President Nursultan Nazarbayev said this month that Moscow had swung round after oil majors working in Kazakhstan agreed to join the link to Burgas. Tokarev said Transneft will invest 200 billion roubles ($8.1 billion) in 2008, slightly less than in 2007, on all projects, including the expansion of pipelines to major refineries in Volgograd, Ryazan, Tuapse and Kirishi that plan large upgrades.