Wednesday, April 26, 2006
Russia Should Cut Oil to Europe, Cut Discounts on Urals Crude � Transneft
24.04.2006 MosNews - Russia's planned oil pipeline to Asia will help cut deliveries to Europe, which is currently being oversupplied with Russian crude, the head of Russia's pipeline monopoly Transneft told a newspaper, the Reuters news agency reported. "We have overfed Europe with crude. And every single economic manual says that excessive supplies depress prices," Semyon Vainshtok told the daily Nezavisimaya Gazeta in an interview published on Monday. "As yet we cannot reduce supplies, as all our exports are going to Europe. But as soon as we divert (flows) to China, South Korea, Australia and Japan, that will immediately take away crude from our European colleagues," he added. Vainshtok has repeatedly said that building a pipeline to Asia would help diversify Russian oil flows and cut discounts on the country's mainstay Urals crude blend in European markets. His new comments are likely to come under much closer scrutiny after another Russian monopoly, state gas behemoth Gazprom, shocked Europe last week by saying it would supply gas elsewhere if its expansion in Europe was blocked. The European Union said Gazprom's threats only confirmed Europe's views that it needed to diversify its energy imports. Russian critics say Gazprom's comments mean the Kremlin is increasingly active in using energy as a weapon in a situation when Europe relies on Moscow for a quarter of its gas needs and Russia produces every ninth oil barrel in the world. Vainshtok said Transneft planned to use a shipping fee of $38 per ton of crude oil on the Asian-Pacific pipeline route to make it competitive with current fees paid on the route to the Black Sea port of Novorossiisk. The $11.5-billion pipeline will ship 600,000 barrels per day at the first stage, mainly to China, with supplies rising to 1.6 million bpd at the second stage, when a big terminal is build on the Russian Pacific coast. Vainshtok said his firm would borrow 13.4 billion roubles ($487.1 million) from state bank Sberbank and another $2 billion via a five-year loan from Western banks. The firm had previously planned to borrow up to $6 billion from Western banks, led by Barclays.