Construction of Espo Pipeline 2nd Phase May Be Postponed – Ministry

ST. PETERSBURG. April 10 (Interfax) – The construction of the second phase of the Eastern Siberia-Pacific Ocean pipeline may be postponed by three or four years due to the fact that growth in reserves is behind target, Sergei Fedorov, director of the Natural Resource Ministry’s state geological policy department, said at a press conference in St. Petersburg on Tuesday.

“At the moment, due to a delay in growth in reserves, the implementation of the project to build the second phase of the pipeline, that is – its expansion to 80 million tonnes of oil per year, may be postponed by three-four years,” he said.

Fedorov said that the Natural Resource Ministry believes that budget financing for geological exploration work in Eastern Siberia should increase.

“In this case the state, possibly, should take on expenditure to expand stratigraphic drilling, for additional volumes of geodesic work,” he said. He said that additional budget expenditure on stratigraphic drilling is estimated at 1 billion rubles per year.

Fedorov said that at the moment recoverable C1 and C2 reserves at fields in Eastern Siberia amount to 700 million tonnes. “This theoretically makes it possible to produce and transport about 30 million tonnes of oil per year,” he said.

Meanwhile, Transneft Vice President Sergei Grigoriev told Interfax that the company has never given a concrete schedule for starting construction of the second phase. “A decision on the start of construction of the second phase, which should be reached by the government, will depend on the pace of development in Eastern Siberia,” he said.

Transneft (RTS: TRNF) plans to spend 198.7 billion rubles on financing Eastern Siberia-Pacific Ocean pipeline construction in 2007, which is almost 130% more than in 2006 (88 billion rubles). Transneft plans to lay about 1,250 km of the pipeline in 2007.

The first start up complex of the Eastern Siberia-Pacific Ocean pipeline system involves the construction of a pipeline with a capacity of 30 million tonnes of oil from Taishet to Skovorodino, and a special port at Kozmino.

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