Transneft May Study Pipe to Offtake Arctic Offshore Crude

OAO Transneft is ready to study bringing Russia’s oil pipeline network to the Arctic offshore as OAO Rosneft and Exxon Mobil Corp. search for crude in the ice-bound Kara Sea.

Extending a northerly Siberian pipeline to the Taz Bay to take on Arctic offshore oil could be an option, said Igor Dyomin, spokesman for Russia’s state-run oil pipeline operator. While oil needs to be discovered first, the plan could offer an alternative to export by ship, he said.

Rosneft, Russia’s largest oil producer, and Exxon plan exploration wells next year in the Arctic offshore seeking to prove that the virgin waters are an extension of Siberian geology, where Russia produces more than 60 percent of its oil.

Temperatures dropping to minus 60 degrees centigrade and ice more than 3 meters thick pose challenges to a preliminary plan to load tankers for Europe near new field. Ice-class tankers would make the 1,900-mile (3,057-mile) journey from the Kara Sea to Rotterdam, accompanied by icebreakers when necessary, according to a 2012 video on Rosneft’s website.

Rosneft declined to expand on that plan. It is premature to discuss transit prior to making a commercial discovery, Rosneft’s press service said, responding to queries about potential routes.

‘Really Tough’

“The ice there is really tough,” Transneft’s Dyomin said. Entering the Transneft pipeline network at a neighboring spot could provide another option, he said.

Purpe-Zapolyarye, the pipeline that may be considered for extension, could also give producers the ability of supply Asia, as it will link to Transneft’s East Siberia Pacific Ocean pipeline. Rosneft already plans to increase supplies to China along this route.

The Moscow-based producer aims to more than double shipments to the Asian nation in agreements running at least through 2037, and according to a copy of the deal obtained by Bloomberg News.

Transneft rose 0.2 percent to close at 67,474 rubles in Moscow today.

The route may not be positive for preferred shareholders in the state-run pipeline operator who want higher payouts, according to Alexei Kokin, an oil and gas analyst at UralSib Financial Corp.

“The more capital expenditure, the less hope for higher dividends,” Kokin said. “I don’t see that as changing things for the better, but the oil industry may benefit.”

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