Pipe is Calling

He cut a red ribbon symbolizing the start of construction together with Nikolai Tokarev, Transneft President. Immediately after the first joint had been welded, the guests handed named watches to welders and left commemorative signatures on the ‘pipe’.
This oil pipeline will deliver ‘black gold’ from Vankorskoe Field and fields in the North of Krasnoyarsk Region to Russian refineries and the international market. Thus, it will connect the west and the east of the Russian pipeline system and allow transporting crude from Siberian greenfields towards ESPO. The route will cross the territory of Yamalo-Nenetskiy and Khanty-Manssiyskiy Autonomous Areas. The oil pipeline will be 430 km long and capable of transporting 25 MMtpa with possible further expansion.
Construction was started in October 2009, and the developers hope that the pipeline should attain the designed capacity of 50 MMtpa as early as 2012. It will have to be constructed in a very harsh natural environment and with no expenditures from the federal budget.
According to Sechin, oil companies raised the issue of laying such an oil pipeline more than once or twice but there was no funding. Deputy Prime Minister said that a realistic opportunity emerged only after Transneft had found integrated sources of funding including through agreements with Chinese partners since some of oil is intended for supplies to China. “This project was nonexistent just a year ago”, Nikolai Tokarev, Transneft President, confirmed. – “We decided to respond to applications from oil companies. Since Transneft investment program had already been approved by the Government Commission, we found it possible to allocate RUR17B from our released funds. About RUR47B will be required in total. We will use integrated sources”.
However, Deputy Prime Minister talked of strategy rather than finance when speaking at the inauguration ceremony. “Russian oil transportation system development is a most important element of assurance of economic and energy security of the country”, he says adding that the situation in the world markets makes one think of cardinal revision of energy transportation routes. That is to say, diversification is required, and the new pipeline will make a tangible contribution to accomplishment of this mission.
According to Tokarev, Purpe – Samotlor pipeline will lay the foundation for a new economic path and encourage Russian fuel and energy sector and oilmen to work in new regions with more vigor. Oilmen themselves made no secret of their joy. Sergei Bogdanchikov, President of OJSC Rosneft, noted that the joint work supported by the Government allowed making Russia the global leader in daily oil production.
However, issues with Purpe – Zapolyarnoe route still remain to be solved. “We assume that this is a single system”, Sechin said. – “But it is necessary to solve some technical issues and get funding”. “Sources to fund the second stage are a serious task”, Tokarev echoed at a press conference. – “A whole range of suggestions are voiced including exotic ones”.
— But the solution will be found for sure, — Deputy Prime Minister said. – Consolidated positions of all participants are a very good basis.
Sechin also spoke about incentives for oil companies including tax benefits for particular fields. The conditions are no longer such as they were in the Soviet time. The infrastructure is outdated, the companies have to invest much more money, and one has to mind the environment, too. “One of our tasks is to ensure regional development and preserve the production level”, Deputy Prime Minister said. For instance, companies that develop fields in East Siberia will invest RUR150B in their development this year. Government experts calculated that this investment would result in direct federal budget revenue of RUR53B even with zero customs duty. Sechin is certain that any concerns of the Ministry of Finance over missing budget revenues may be removed thanks to other sources. He had a meeting with Kudrin the day before and discussed the issue. “We managed to agree with the Ministry of Finance on current support for the projects. It is important for oilmen, of course, to have our permanent resolutions,” – he added. – “They need clarity, and the effective period of the benefit should be determined”.
Before coming to the inauguration ceremony, Igor Sechin visited Samotlorskoe Field, which is the biggest one in Russia and one of the biggest ones in the world. He was shown how one can treat the ‘black gold’ from the energy efficiency point of view. Virtually all of associated petroleum gas produced by TNK-BP in Nizhnevartovsk area is processed very efficiently. For instance, a high efficiency gas turbine power plant needs just a little associated gas to almost eliminate the shortage of power that is required for oil production. Processed associated gas is supplied to Gazprom’s Unified Gas Transportation System. It is also consumed by Nizhnevartovsk boiler houses.
In Belozernyi Gas Processing Plant, Deputy Prime Minister was told about associated gas processing in great detail.
— Both processing and production companies are represented in this room, — Sechin said looking at his business escort. – Do you feel synchrony of your processes? (i.e. production and processing. — RG) Is there coordination among production and processing companies? – he asked.
— There are three regions with problems, — Sergei Kudryashov, Deputy Minister of Energy, replied instead of the businesspeople. – Such as Tomsk Oblast, for instance.
— Yamal, of course, — Deputy Prime Minister added.
— Plus Yamal, — Kudryashov echoed. – The group of subsoil users should join with processing companies there.
— Everything is synchronized in our region, — Alexander Sleptsov, General Director of LLC Yugragazpererabotka hurried to edge in. – We develop in agreement with all partners.
Closing the discussion, Sechin urged to upgrade production facilities and improve skills of the personnel because the enterprise has good equipment, so the employees may become relaxed, which is fraught with emergencies.
— That is correct, — Sleptsov agreed immediately. – We actually had a fire two years ago. This is an area where one cannot rest on laurels.