December 27, 2007 / 4:39 PM / 11 years ago

UPDATE 1-INTERVIEW-Russia delays Asian oil pipeline to Q3 2009

(Writes through with full interview)

By Tanya Mosolova

MOSCOW, Dec 27 (Reuters) - Russian oil pipeline monopoly Transneft will delay the launch of its first pipeline to Asia by at least nine months due to slow construction work, but will make sure oil producers do not suffer, its head told Reuters.

Under the initial plan, Transneft (TRNF_p.RTS) should have built the 600,000 barrels-per-day link to the border with China by the end of 2008 to help Russia, the world’s No.2 oil exporter, diversify its exports away from European markets.

But Transneft’s new president, Nikolai Tokarev, who replaced Semyon Vainshtok in October, has asked the government to allow him to delay the project after he found contractors had fallen seriously behind schedule.

“There is only one scenario now — a delay to the second half, most likely to the third quarter of 2009,” Tokarev said in his first interview with an international news organisation since taking on the job.

“I do not know what guided people who irresponsibly said the pipeline can be completed in 2008. It cannot even theoretically be done by the end of 2008,” Tokarev said, criticising previous management.

Tokarev, an ally of President Vladimir Putin with a background in the security services, took over from Vainshtok after it became clear that the Asian pipeline was behind schedule and over budget. Before October, Tokarev ran state-run overseas oil company Zarubezhneft.

Transneft is building the 2,700-km pipeline from East Siberia to Skovorodino near the Chinese border with the help of two general contractors, private firms KrasnodarStroiTransGas and StroiSistem.

Tokarev complained that both firms use equipment ill-suited to the extreme weather conditions in Siberia — where winter temperatures can plunge below minus 50 degrees Celsius — and employed too many poorly qualified migrant labourers.

“The people who came to Siberia didn’t have the faintest idea of how to build a pipeline in such conditions,” he said.

“The heavy machinery is designed for use in southern regions, without cabins. The engines can’t start in freezing temperatures and bulldozer operators have to stop work every 30 or 40 minutes to warm up.”

Tokarev said he would change subcontractors to speed up work and improve quality: “We understand how to solve the situation. Time is our only problem.”

COSTS WILL NOT RISE

Vainshtok, now leading preparations for the 2014 Winter Olympics in Sochi, repeatedly revised the pipeline’s costs from the initial $6 billion, citing rising steel and services prices.

Tokarev said he will stick to the latest estimate of 303 billion roubles, equal to $12.27 billion at the current exchange rate.

The project also envisages building a 43 billion rouble ($1.74 billion) terminal on the Pacific coast, as half the crude will go to China and the other half to the terminal by rail.

As soon as the project’s first phase is launched, Transneft will start working on building a pipeline to the Pacific and expanding the system’s entire capacity to 1.6 million bpd.

The project will help Russia develop untapped fields in East Siberia to replace dwindling output in West Siberia, with state major Rosneft (ROSN.MM), No.3 and No. 4 oil firms TNK-BP (BP.L) and Surgut (SNGS.MM) seen as the main suppliers.

Tokarev said those producers and Russia’s overall output won’t suffer: “There are some schemes how to shift (production) between the West and the East,” he said. He added his firm has some spare capacity at the Black Sea port of Novorossiisk to accommodate producers awaiting the launch of the Asian pipeline. (Reporting by Tanya Mosolova; Editing by Douglas Busvine and Peter Blackburn)

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