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Transneft seeks higher pipeline rates on inflation

Transneft, Russia's oil-pipeline operator, wants to raise prices 5.7% next year to help offset inflation, and will further increase prices after borrowing money to build a new link to the Pacific.

The Federal Tariff Service will rule on the request by the end of the year, OAO Transneft’s deputy CEO Sergei Grigoryev said via telephone in Moscow yesterday. The company will get a second increase to meet debt payments after it borrows next year to build a planned pipeline across eastern Siberia, he said. „Once we borrow for a specific project, the government will add the investment component to our tariff,” Grigoryev said. „It won't be higher than inflation for the year.” Russia is trying to keep the inflation rate at 8.5% next year. Russia, the world's second-biggest oil supplier, is building a 2,800-kilometer (1,700-mile) from eastern Siberia to the Pacific to encourage companies to develop untapped resources and increase crude exports to Japan and China, the world's fastest-growing energy consumer. The cost of the link to Skovorodino, near the Chinese border, will exceed an initial estimate of €5 billion ($6.5 billion), though it's too early to know by how much, Grigoryev said. „It will definitely be more expensive,” Grigoryev said.

A decision to alter the route to protect Lake Baikal, the world's largest and oldest body of fresh water, will add at least $1 billion to the project, President Vladimir Putin said October 25, amid criticism the country is using environmental checks to gain control of oil and gas assets. The new route takes the pipeline closer to fields being developed by state-run OAO Rosneft, OAO Surgutneftegaz and BP Plc's Russian unit, OAO TNK-BP. It's supposed to start carrying crude by the end of 2008. The stretch to Skovorodino will be able to carry 600,000 barrels a day. That will be expanded to 1.6 million barrels a day when the link is extended to the Pacific. West Siberian oil will be exported until crude from eastern Siberia is available. Transneft now charges an average 54 US cents to ship 1 ton of crude 100 kilometers, Grigoryev said. (Bloomberg)