Russia to Build Arctic Link to Fill Asia Pipe With TNK-BP, Gazprom Crude

OAO Transneft, Russia’s oil pipeline operator, plans to build a link with OAO Lukoil, TNK-BP, and OAO Gazprom Neft to unlock Arctic deposits and fill an existing route to Asia.

The oil producers will form a venture to construct the 60 billion-ruble ($2 billion) pipeline as Transneft doesn’t have the money to work alone, Transneft Chief Executive Officer Nikolai Tokarev told journalists in Moscow today.

Transneft will buy the pipeline, which will connect the Zapolyarnoye region to the Purpe transit hub, by providing the oil companies discounts to transit rates, Tokarev said. The link will have a capacity to ship 12 million metric tons of oil a year.

“We aren’t going to waste time,” Tokarev said. “This is the north and the best time to build is the winter period. We’ve decided not to wait until all the formal procedures are completed.”

Lukoil, TNK-BP and Gazprom Neft plan to develop deposits in northern regions to replace declining output in Russia’s traditional resource base in West Siberia. Crude from the region will help fill Transneft’s East Siberia-Pacific Ocean pipeline to supply China, the U.S. and Asia Pacific markets.

To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@bloomberg.net.

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