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(E) Russia's first Mediterranean oil outlet through Croatian port
By Nenad N. Bach | Published  12/22/2002 | Business | Unrated
(E) Russia's first Mediterranean oil outlet through Croatian port


Russia gains first Mediterranean oil outlet

Central Asia 
Russia gains first Mediterranean oil outlet
By John Helmer 
MOSCOW - As Russia's crude oil production for 2003 is forecast to continue this year's growth, outstripping domestic demand, and the Kremlin remains unconvinced and undecided on major new export outlets, a new agreement to open a pipeline to the Croatian port of Omisalj has beenmade, with a minimum of controversy. 
According to Sergei Grigoryev, vice-president of Transneft, the state pipeline operator, "realization of this project will not require any large-scale investments in the Russian part of the pipeline, but some other countries, particularly Croatia, will have to invest [the largest part]". 
The project announcement, issued on Monday by the governments of Russia, Croatia, Belarus, Slovakia and Hungary, will require Croatia to spend US$19 million to reverse the flow of the pipeline between Omisalj to the terminal town of Sisak. Another $320 million in investment is projected to triple the existing capacity of the Druzhba-Adria pipeline network, so that shipments can jump from 5 to 15 million tonnes per annum. The project has been in negotiation for two years. Agreement was made possible by the decision of Ukraine to accept a tariff of $0.64 per tonne per 100 kilometers, 12 percent below the current pipeline tariff being charged across Ukrainian territory. 
This is the first transportation agreement enabling Russian oil to reach the Mediterranean without having to pass the Turkish straits. Russians are being squeezed by the government in Ankara, which prefers to concentrate oil flows through the planned new pipeline from Baku, Azerbaijan, to Ceyhan. Another Russian alternative, involving a tanker shuttle across the Black Sea to Burgas, Bulgaria, and a pipeline from there to Alexandropoulos, Greece, is stalled in negotiations that have now lasted more than five years. 
Transneft is proving to be a tough defender of its pipeline monopoly inside Russia; tougher indeed than Russia's oil majors have anticipated. While the oil producers want the Kremlin to agree to support and help finance pipeline routes to Murmansk, on the Barents Sea, and to Daqing, in northern China, Transneft is objecting, arguing that the costs do not justify either the outlays, or the market forecasts. 
However, the Croatian outlet, Grigoriev told Asia Times Online, is unobjectionable. "Five million tonnes per year to begin with is not a large volume of exports, but this route opens access to the US market for Russian oil companies. This project will not lead to any changes on other routes operated by Transneft. It will only expand Russian export capacities by using a new route." 
Yukos, Tyumen Oil Company and Rosneft are reported to be the first Russian oil producers to aim to ship through Omisalj to the US. Yukos - which this year also acquired the Slovak pipeline operator Transpetrol - is likely to dispatch 5 million tonnes of oil for shipping out of Omisalj; Tyumen Oil Company 2.5 million tonnes. 
Dmitri Panteleyev, spokesman for Rosneft, said that his company has signed a memorandum of understanding with Marathon Oil for shipments to the US. "This is not a contract," he said, "so it doesn't specify the volumes of possible deliveries, but the letter says that deliveries are to start some time in 2003. When we will be discussing the volumes and exact routes for deliveries, we will probably pay special attention to Omisalj." 
Sergei Lukyanov, an industry analyst in Moscow, told Asia Times Online that "Yukos and probably other oil companies are now trying to establish themselves as suppliers of oil to the US. In order to do that, they have to have one or two shipments per month to the US. Omisalj port is perfect for supplies to the US, as it enables the companies to use larger tankers." 
Russian tanker companies say that they don't expect to be favored for shipments out of Omisalj. Yukos has been trialling shipments from the Murmansk roadstead using tankers from Novorossiysk Shipping Company, but none of the Russian tanker operators has the very large crude carriers (VLCCs) that are likely to be used from Omisalj. According to Panteleyev of Rosneft, "Deliveries to the US will be considered later, including whether we will use services of Russian tanker companies or not. Until now, Rosneft has not made any trial oil deliveries to the US." 
Igor Borisenko, deputy general director of Sovcomflot, Russia's leading tanker operator, said that the Russian fleet doesn't have VLCCs because "analysis shows that these are very problematic vessels from the point of view of investment. Often the performance of VLCC tankers is close to loss-making, and there are not many cases when VLCC vessels are used very effectively." He said that negotiations are under way with Yukos and LUKoil for long-term tanker contracts that include US deliveries. But he added, "I don't think there will be any privileges given to Russian shipping companies." (©2002 Asia Times Online Co, Ltd. Dec 20, 2002 
Copyright Asia Times Online, 6306 The Center, Queen’s Road, Central, Hong Kong.

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