Russian Budget May Fund Siberian Pipe Expansion, Transneft Says

Russia's government is considering providing funds from the budget to expand an oil pipeline starting in eastern Siberia, the country's crude pipeline monopoly said.

Ministers and officials are reviewing a financing plan to extend the link from Skovorodino, near the border with China, to Russia's Pacific Ocean coast, Mikhail Barkov, an OAO Transneft (TRNFP) spokesman, said by phone today from Moscow.

``We expect to complete construction of the first stretch of the pipeline without additional budget funding,'' Barkov said.

Transneft plans to finish building the first 2,757-kilometer (1,700-mile) Taishet-Skovorodino leg of the pipeline by the end of 2009. The oil link will be further extended to the Pacific coast and will have an annual capacity of 80 million metric tons (1.6 million barrels a day), according to Transneft's Web site.

``The move may also help stop tariff growth, which has already hit oil producers, as well as limit possible future delays in the Eastern Siberian pipeline project in the event of financing problems,'' Artyom Konchin and Ilya Balabanovsky, oil and gas analysts at UniCredit SpA, wrote today a report to investors.

Next month, OAO Surgutneftegaz and TNK-BP (TNBP), the Russian venture of BP Plc, plan to supply oil from their eastern Siberia oil fields through the pipeline, according to Transneft's Web site. The link will flow in reverse to western Siberia before construction of the pipeline is completed to Skovorodino next year.

The state-run company plans to build the second phase of the Eastern Siberian project while expanding the Baltic Oil Pipeline System, which pumps crude from Siberia to the Baltic Sea port of Primorsk.

``Soon there will be a decision'' to expand the pipeline to the Baltic because ``it's difficult for the company to fund all these complex projects on its own,'' Barkov said.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Guy Collins at guycollins@bloomberg.net

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