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Russia may end oil supplies to Europe via land pipe

Russia, the world's largest oil producer after Saudi Arabia, plans to build a new oil-export link to the Baltic port of Primorsk, bypassing Belarus, which may end supplies to Europe through the land pipeline Druzhba.

The government is expected to make a decision on the new link construction „within a month,” said Semyon Vainshtok, president of OAO Transneft, Russia's state-controlled pipeline monopoly. The new pipeline will have a 50 million-ton-a-year capacity (1 million barrels a day), which will be expanded if necessary to boost exports via Primorsk, Russia's largest oil port. „The transit risks for Russian oil are increasing,” Vainshtok said at the International Petroleum Week conference in London today. „We will cut tariffs to make it more profitable” to export oil via Primorsk than Druzhba. Transneft cut supplies to Belarus for three days last month after Russia's western neighbor demanded a transit fee for crude, causing shortfalls to refineries in central Europe. The 5,500-kilometer long Druzhba, completed in 1964, has been supplying about 83 million tons of crude a year via Belarus and Ukraine to Germany, Poland, Hungary, Czech Republic and some other central European states, according to Transneft.

The new pipeline will be built from Unecha, near Russia's border with Belarus, to Primorsk and its capacity will finally match or exceed Druzhba's capacity, Sergei Yevlakhov, a vice president at Transneft, told reporters in London today. „Oilmen will have a choice,” Vainshtok said. „But please don't think that we intend to shut down Druzhba.” Transneft has dispatched 900 workers to examine the route of the future 1,200-kilometer long Unecha-Primorsk pipeline, he said. The new pipeline „will be part of the Transneft system and we will bid for a quota” to export oil, Anthony Considine, an executive vice president at TNK-BP, told reporters in London. At the same time, „we are very happy to utilize all the routes, the export routes, we'd like them all to be open.” President Vladimir Putin's government is building new oil and gas pipelines to diversify exports and cut risks to transportation disruptions through pipelines crossing neighbor states, such as Ukraine and Belarus.

About half of country's oil export is pumped via transit states. Russia plans to boost exports via ports in tankers, according to Vainshtok. OAO Sovcomflot, Russia's biggest shipping company, has proposed to Transneft to export crude from Primorsk in tankers able to carry 162,000 tons, up from current vessels shipping 100,000 tons. „This will cut traffic and will boost cargo shipping,” Vainshtok said. „They will be able to pass the Dutch Straits.” Russia plans to expand Primorsk port capacity to accommodate additional volumes, Putin said February 1. An existing pipeline, Baltic Pipeline System, is already supplying about 1.5 million barrels a day of oil from central Russia to the port. (Bloomberg)