AS EUROPE EMBRACES ENERGY CONSERVATION, MOSCOW LOOKS TO ASIA’S GROWING DEMAND

Russia has reiterated plans to diversify its oil and natural gas exports with a growing focus on the Asia-Pacific region. In the near future, the main instrument of the Kremlin’s strategy to re-orient hydrocarbon exports from Europe to Asia remains the planned oil pipeline from eastern Siberia to the Pacific Ocean.

Moscow is planning to boost oil and gas exports eastward, Industry and Energy Minister Viktor Khristenko recently told the official Rossiiskaya gazeta daily. Russia is to deliver up to one-third of its total oil exports to the Asia-Pacific region by the year 2020, compared to a mere 3% now, he said.

Khristenko said that Asia would need more hydrocarbon resources in the coming years, while the West is planning to limit energy consumption. Therefore, Russia plans to “sharply re-orient” its hydrocarbon exports to Asian consumers, and the huge Sakhalin oil and gas deposits, along with new petroleum reserves in eastern Siberia, are now being developed in pursuit of this strategy, he said (Rossiiskaya gazeta, February 22).

Russian officials also remain keen to convince potential Asian importers that Siberia has sufficient reserves to cater to growing Asian energy needs. Eastern Siberia still has not tapped the Kovykta and Chayandin gas reserves, and the development of these fields would depend on domestic and foreign demand, Khristenko said. He also pledged to make a decision on the Kovykta project later in 2006.

Asked whether protests by environmentalists could delay the Pacific oil pipeline project, Khristenko said he had no reasons to believe that the construction of the first phase would not be completed by 2008. He also claimed that the pipeline would satisfy the required level of environmental safety (Rossiiskaya gazeta, February 22).

Earlier this year, the Federal Service for Ecological, Technological, and Nuclear Supervision (also known under its Russian acronym Rostechnadzor), voiced some reservations over the pipeline route from eastern Siberia to the Pacific Ocean. In late January Rostechnadzor expert Gennady Chegasov indicated that he had not approved the section of the pipeline that would run along the shores of Lake Baikal.

Nezavisimaya gazeta claimed that Chegasov was biased in his estimates, because he was allegedly working as a consultant on the pipeline projects. Chegasov, who used to head the audit department of the State Environmental Agency, disbanded by President Vladimir Putin’s decree in 2000, could have had personal reasons to oppose Putin’s marquee project, the daily alleged (Nezavisimaya gazeta, February 16).

Subsequently, Rostechnadzor head Konstantin Pulikovsky, the former presidential envoy in the Far East, extended the environmental probe into the pipeline route until mid-March. Therefore, the pipeline route along the Baikal shore remains a matter of further debate.

On the other hand, the authorities also moved to address environmental concerns sparked by the pipeline project. On January 23, Putin’s envoy in the Far East, Kamil Iskhakov, suggested changing the destination of the Pacific pipeline from Perevoznaya Bay to the Nakhodka area.

The Russian state-run oil pipeline monopoly Transneft expressed readiness to discuss an alternative site for an oil-export terminal. Transneft head Semyon Vainshtok reportedly said Kozmino Bay, close to Nakhodka, is currently being considered instead of Perevoznaya Bay as a terminal site on the shore of the Sea of Japan.

During his trip to Yakutiya in early January, Putin emphasized the need to prioritize development of the energy infrastructure in Eastern Siberia and the Far East. Putin also described the Pacific pipeline as a national priority project and suggested starting construction in summer of 2006.

The Pacific pipeline is also supposed to give Russia’s economically depressed regions a much-needed boost. The oil pipeline is expected to be commissioned in 2008, while Primor region hopes to receive up to $1.2 billion in the next five years from oil transit taxes and new jobs.

According to official Russian estimates, Eastern Siberia has up to 10 billion tons of recoverable oil reserves or about 15% of Russia’s total oil reserves, and 40 trillion cubic meters of gas (nearly 20 percent of the country’s total). However, to raise East Siberian oil production up to 80 million tons, the level needed to fill the pipeline to full capacity, massive investments are needed.

Furthermore, the Pacific oil pipeline is seen as an important tool to integrate Eastern Russia into the booming Asia-Pacific region. This strategy was first revealed at the APEC summit in 2003 in Bangkok, when Putin pledged to turn Russia into a cornerstone of energy security in Asia and the Pacific. The official RIA-Novosti news agency has commented that Russia prioritized an APEC energy demand, notably because Russia is the only major oil and gas supplier out of APEC’s 21 member states (RIA-Novosti, January 24).

Meanwhile, the Kremlin is yet to determine all the recipients of crude funneled through the future Pacific pipeline. Earlier this month, Khristenko announced in an interview that the Kremlin had made a “strategic” decision to build a branch from the Pacific pipeline to China. About 30 million tons of oil would be shipped to China, out of the pipeline’s total capacity of 80 million tons. Khristenko also promised a tax-free regime lasting five-to-seven years for potential investors to tap the resources of Eastern Siberia (Vedomosti, February 6).

Beijing lost little time indicating its continued interest. The Chinese leadership remains keen to sign an agreement with Russia on building an offshoot from the Pacific pipeline to China (Interfax, February 15). However, despite upbeat official pronouncements, any binding international agreements regarding the Russian Pacific pipeline appear to remain far in the future.