Russia unveils $25 bn oil link to Pacific

Dec 25 2012, 17:58 IST
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SummaryRussian President Vladimir Putin today unveiled the final extension of a new USD 25 billion oil pipeline to the Pacific that underscores the energy power's gradual shift away from stagnant European markets.

Russian President Vladimir Putin today unveiled the final extension of a new USD 25 billion oil pipeline to the Pacific that underscores the energy power's gradual shift away from stagnant European markets.

The East Siberia - Pacific Ocean (ESPO) link is also expected to expand sales to the United States and fulfil Putin's dream of cementing Russia's place as a dominant force on international crude markets.

Moscow hopes to make ESPO into a benchmark in the Asia Pacific region that competes with WTI -- the US oil standard whose price some traders believe is too heavily based on domestic political factors.

But analysts worry that Russia may currently lack enough accessible oil in its underdeveloped East Siberia fields to keep the line fully flowing despite strong demand in China and Japan.

“There is just enough East Siberian for the existing pipeline," said Sberbank Asset Management energy analyst Valery Nesterov.

"But expanding this pipeline further would be impossible without West Siberian oil -- and that oil is already meant to go west," Nesterov pointed out.

Putin brushed those concerns aside as he joined in the ribbon-cutting ceremony by video link from the Far East city of Khabarovsk.

"By completing the second leg, our potential is expanding," Putin said in televised remarks. "This is a serious event."

The second leg of the 4,200-kilometre pipeline runs from fields west of Lake Baikal to the Pacific port of Kozmino near the northeastern edge of China.

The port -- previously connected to East Siberian oil fields by rail -- also provides Russia with quick access to Japan and South Korea.

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