Russian oil majors Transneft and Rosneft have agreed to increase Russian oil supplies to China. This marks a relaxing of tensions between the two countries over pipeline network expansion costs.
Expansion of the EPSO pipeline
Rosneft President Igor Sechin and Transneft President Nikolai Tokarev, have signed a number of agreements based 鈥渙n principles of co-financing to鈥� increase oil supplies volumes to China and to the Rosneft鈥檚 Tuapse refinery in the Krasnodar region, Russia.
Under the agreement, Transneft will finance the expansion of the Eastern Siberia-Pacific Ocean (EPSO) oil pipeline, which runs from Skovordino, Russia, to the Chinese border. This will support Rosneft's growing oil supplies to China. Rosneft will pay back the investment through a special long-term tariff to be determined by the Federal Tariff Service.
According the Energy Ministry, 鈥淭ransneft will deal with the increase in the oil pipeline volumes. Financing, designing and construction, of the EPSO pipeline system will also lie with Transneft. A special investment tariff will cover the costs of the pipeline鈥檚 capacity on the Skovorodino-Mohe stretch.鈥�
EPSO capacity
The pipeline capacity is expected to reach 20 million tpy, beginning on 1 January 2015, and 30 million tpy beginning 1 January 2018. The sides did not disclose the amount of investment required for the pipeline expansion, but industry experts put the cost at approximately US$ 200 - US$ 300 million.
The agreements reached are aimed at fulfilling an agreement between the Government of the Russian Federation and the Government of the People鈥檚 Republic of China to expand cooperation in crude oil trading, which was signed on 22 March 2013.
Edited from various sources by