June 16, 2008

Construction to Begin on Second Phase of Espo Pipeline in Dec 2009 – Transneft

MOSCOW. June 16 (Interfax) - Construction on the second phase of the East Siberia-Pacific Ocean (ESPO) oil pipeline will begin in December 2009, Nikolai Tokarev, president of Russian oil pipeline operator Transneft (RTS: TRNF), said at a meeting with President Dmitry Medvedev on Monday.

"Surveying is being held on the second phase and will be completed by the end of this year," he said.

A feasibility study on the second phase will be prepared by mid- 2009, by which time all the necessary expert appraisals will be completed, he said.

Medvedev noted that he gave instructions to Transneft officials and several ministries concerning the construction of the ESPO pipeline during a visit to Khabarovsk in February 2008.

Tokarev said the company carried out a thorough analysis of the project in the run-up to Medvedev's visit since a change in company leadership has just occurred. "The analysis revealed a number of factors of an objective and subjective nature that had significantly impacted the timeframe and quality of the construction of ESPO facilities," he said.

The objective factors included extending the pipeline as a result of changes to the configuration of its route and extreme weather conditions, while the subjective factors included the organization of work and the fulfillment of obligations by contractors, some of which "turned out to be unsound," Tokarev said.

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