RUSSIA’S PACIFIC OIL PIPELINE GAME REMAINS INCONCLUSIVE

In a statement on September 29, Russia’s Natural Resources Ministry rejected a feasibility study for a Siberia-to-Pacific crude oil pipeline. The pipeline would pass within just 800 meters of Lake Baikal, a violation of Russia’s environmental legislation. According to the Ministry, “As the pipeline crosses a number of tributaries [to Baikal], any leakage of oil risks the destruction of a unique ecosystem.” The Ministry also said that Transneft’s planned route failed to specify a terminus for the pipeline. Valentin Stepankov, a deputy minister, has notified the State Technical Supervisory Agency of the ministry’s concerns, according to the statement.

Transneft Vice President Sergei Grigoryev has reportedly rejected the Ministry’s ruling. However, the official veto of the planned route leaves Transneft with four options: abandon the pipeline project altogether; draw up a longer and costlier alternative route; push to amend Russia’s existing legislation to fit the current route; or proceed with the project and ignore Russia’s environmental law (Prime-Tass, Sept. 30).

The Natural Resources Ministry’s rejection of the planned route for the Siberia-Pacific pipeline came as a victory for environmentalists, who have long argued that Transneft’s stated route poses an environmental risk to Lake Baikal and protected nature reserves near Perevoznaya Bay. Two years ago, the Natural Resources Ministry similarly rejected a Yukos-backed plan for a pipeline from Siberia to China on environmental grounds.

Environmental activists even sought Japanese assistance to analyze the pipeline’s route. Last March some 40 environmental groups wrote a letter to Japan’s Prime Minister Junichiro Koizumi and suggested that Tokyo might be able to convince Russia to change the route of the Pacific oil pipeline.

The activists claimed that Russian Prime Minister Mikhail Fradkov’s December 31 decision on pipeline routes (to China versus to Japan) was illegal, as it had not been subjected to an environmental impact study. Activists suggested that the Kremlin should consider alternative routes to Nakhodka, Olga, or Strelok Bays as proposed sites for an onshore oil terminal.

The Kremlin saw construction of a Pacific oil pipeline — with an annual capacity of up to 80 million tons — as a project that might boost development in Siberia and the Russian Far East. Prime Minister Fradkov approved the Taishet-Nakhodka oil pipeline project at the end of 2004. The pipeline would go from Taishet to the Perevoznaya Bay, crossing Russia’s Irkutsk, Chita, Amur, Buryat, and Primor regions. Plans for the Pacific oil pipeline were to be finalized by May 1, 2005.

But in recent months Moscow has seemed to lean towards the rejected China-bound route. At a September meeting with Western analysts and journalists, Russian President Vladimir Putin said that the Pacific oil pipeline would export oil to China first, instead of Japan. “The Daqing pipeline will be built first, but we will also build to Nakhodka,” Putin reportedly said.

However, environmental considerations are hardly at the top of Moscow’s priority list in terms of the Pacific pipeline game. Putin is on record as saying that “environmental concerns must not hinder the development of the economy.”

While Moscow waffles, Beijing is growing impatient to tap Siberia’s hydrocarbon resources. Chinese media recently reported plans for China’s first private oil pipeline to import oil from Russia. A 30-kilometer, cross-river pipeline, which would connect railway lines between Heihe, a port city in Northeast China’s Heilongjiang Province, and Siberia’s Blagoveshchensk, is expected to be completed and start operation next year.

The line is to be built by Heihe-based Xinghe Industries in cooperation with the Russian Lanta Oil at a cost of 520 million yuan ($64 million). It is expected to begin operation in September 2006 with an annual capacity of 21 million barrels (3 million tons) of oil. It may reach its full capacity of 5 million tons by the year 2008. Xinghe would invest $43 million, and Lanta Oil will underwrite the remaining $21 million.

Construction will include a rail unloading field and oil transfer station in Blagoveshchensk, four pipelines crossing beneath the Heilongjiang River, and another rail loading field and oil transfer station in Heihe.

China now imports less than 10 million tons of crude oil from Russia each year. The number is due to reach 15 million tons in 2006, according to an agreement signed between the two countries last October. Now China mainly relies on railways, linking the land port of Manzhouli in Northeast China and the port of Erenhot in Inner Mongolia, to import crude oil from Russia. The construction of the private pipeline is aimed at relieving the oil transportation bottlenecks between the two countries (China Daily, September 28).

Amid unresolved Russo-Chinese oil pipeline issues, reported plans of China’s first private pipeline look like Beijing’s reminder that Moscow needs to back up its pledges to develop a “strategic energy partnership” with China with something concrete.

The rejection of the planned route for a Japan-bound pipeline on environmental grounds may be a convenient pretext to switch to a China-bound pipeline.