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Expert Board of Transneft Held its 18th Meeting

Date of publication: 10 March 2016

On 10 March 2016, Transneft held in Moscow the 18th meeting of the Expert Board, at which the attendees discussed oil transportation options (Northern Sea Route, railway and road transportation).

At the meeting the Company was represented by its Vice Presidents Mikhail Margelov and Sergey Andronov, by Igor Katsal, Deputy Vice President – Director of the Oil Flows Metering and Planning Department, Vladimir Nazarov, Deputy Vice President – Director of the Oil Products Transportation, Metering and Quality Department, and by Rasim Mingazetdinov, Head of the Strategic Development Department of Transneft, JSC.

Besides, the event was attended by Vitaly Karaganov, Advisor to the Governor of Yamal-Nenets Autonomous District, Roman Mezhlumyan, Head of the Monitoring and Analysis Department, Office of State Orders for Marine Transport Development Programs at the RF Ministry of Transport, Aleksey Khmelnitsky, Director of Energy Research Centre at Skolkovo Business School, Natalia Shulyar, Chief Editor of the InfoTEK oil and gas magazine, Chair of the Motor Fuels Subcommittee at the CCI of Russia, and by key industry experts.

Speaking at the meeting, Transneft Vice President Sergey Andronov noted that due to downturn in the global economy 2015 saw a slump in crude refining (of approximately 12 million tons) by Russian refineries for subsequent exportation purposes. Even in view of that factor, the surplus of company’s transportation capacity totalled some 54–55 million tons. This suggested a conclusion that even in case of restricted energy resource exports via the southbound line that volume could easily be redirected to other transportation routes, he said. Sergey Andronov also added that the Druzhba oil pipeline offered the largest surplus.

Speaking about the initiatives that Transneft was implementing to diversify the supply routes, Sergey Andronov highlighted the eastern projects. By 2020, he said, ESPO-1 and ESPO-2 projects would enable to carry some 80 million tons eastwards, of which 30 million tons would be redirected to China via the Skovorodino–Mohe route and the remaining 50 million tons towards the eastern refineries and the Kozmino Port, provided that after a series of special measures the capacity of the Kozmino Port could reach 36.5 million tons.

Apart from that, the new investment projects — Zapolyarye–Purpe and Kuyumba–Taishet — will allow accepting crude from deposits of the Western and Eastern Siberia. Moreover, the Zapolyarye–Purpe oil pipeline could flow crude both westwards (if necessary) and eastwards.

Sergey Andronov also presented results of analysing oil deliveries in 2015 and the plans for 2016, subject to oil companies’ requests. In 2015, the Transneft system delivered some 481.5 million tons of crude, totally to refineries within Russia and to major export directions. The 2016 crude delivery plan is slightly below the 2015 figures, but would be adjusted both after obtaining the Q1 results and in the subsequent periods of the current year, subject to the request-based forecasting principle.

“Transneft has been doing its best to respond to wishes of the market and oil majors in terms of diversifying its supply routes, in order to offer optimal paths for resource transportation to various markets, both westwards and eastwards,” the vice president stressed.

At the Expert Board, Rasim Mingazetdinov brought to the audience a report entitled “Analysis of Oil Delivery by Pipelines via the Northern Sea Route”.

Transneft, JSC heeded a proposal by heads of the Yamal-Nenets Autonomous District on establishing an Arctic Route for exporting Western Siberia’s crude to the Asia and Pacific (up to 40 million tons annually; the proposal is linked to completing construction of the Sabetta sea port and making a fairway to serve as a sea gate in the Gulf of Ob), he said.

Rasim Mingazetdinov noted the Company thought the project implementation would be inexpedient in the near-to-medium term due to a number of causes.

The route would supposedly be loaded at the expense of cutting oil exports westwards by 40 million tons. To create the route it was proposed to use reverse supplies via the existing pipeline system of the Western Siberia and the Zapolyarye–Purpe oil trunk pipeline under construction. It was additionally proposed to build a Zapolyarye–Gulf of Ob oil trunk pipeline (400+ km long) and an onshore oil loading terminal with a set of utilities ensuring its year-round functioning.

Under Transneft estimates, the capex for project involving an onshore terminal construction on the right bank of the Gulf of Ob, in the vicinity of Tadebe-Yakha settlement, shall be some RUB 344 billion, excluding construction of the underwater crossing to the Sabetta port.

In 2016, Transneft would bring online the Zapolyarye–Purpe oil pipeline which would enable the oil trunk pipeline system to receive crude from new deposits of the YNAD and the north of Krasnoyarsk region for subsequent delivery both eastwards and westwards, Rasim Mingazetdinov emphasized. However, crude transportation to fill the ESPO oil pipeline was its primary designation. By 2020, the transportation volumes via the ESPO would reach 80 million tons annually.

However, Mr. Mingazetdinov said, the resource base in the Western Siberia did not exceed 40 million tons per annum, and therefore nearly all the volumes to be delivered via the Zapolyarye–Purpe OTP would be sent to the ESPO system to ensure its loading to 80 million tons. “So, the volumes could only be diverted by reducing westbound deliveries by some 40 million tons,” he said.

Besides, the project implementation would “be an ultimate game changer” in the Rational Routing Scheme approved by the Ministry of Energy of Russia. Diverting the above volumes of sweet crude might immensely affect the oil quality, inter alia oil delivered to the refineries of Russia. “Therefore, Transneft now believes the project implementation is inexpedient in the medium term,” Rasim Mingazetdinov concluded.

He pointed out the need to differentiate proposals on Arctic transportation of Western Siberian crude from the project of developing the Northern Sea Route as such, the latter being crucial for the country.

The issue of Russian crude exportation via the Northern Sea Route should be considered after commencing development of deposits forecasted to be discovered in the northern part of the YNAD and the southern offshore part of the Kara Sea  accompanied by estimates of the project’s feasibility, Mr. Mingazetdinov underscored.

In his turn, Igor Katsal, Deputy Vice President – Director of the Oil Flows Metering and Planning Department at Transneft, explained that serious obstacles in the proposed project implementation were due to the methodological criteria. As opposed to the gas pipeline system, the oil pipeline system transports a “wide array” of hydrocarbons, rather than a mono product (such as natural gas). The existing Rational Routing Scheme envisages formation of more than 20 oil grades for the domestic market and 6 export flows. So, any serious redirection or diversion of huge volumes would entail a change in the quality of the existing oil grades. The company’s executives were unable to adopt such a decision without impact study, Igor Katsal stressed. Preparedness of the Russian refining industry and export routes for potential change in quality must be analysed.

To conclude the Expert Board meeting, Sergey Andronov emphasized that the Northern Sea Route was crucial logistically, and could be used for transit from third countries, and for shipments from gas projects implemented within the region. As for creation of a new oil route in the Arctic, he said, after the comprehensive and in-depth analysis it was possible to consider the option of transporting some volumes from the offshore via the Transneft system. “The project must be weighed very prudently, because the time is wrong now for erecting infrastructure “artifacts” to have them subsequently idling,” Sergey Andronov concluded.

Press Service of Transneft, JSC
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