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Russia: Companies May Join Forces To Export Oil To U.S. From Murmansk

Russia's northern port of Murmansk is the focus of the latest plans to increase oil supplies to the United States. The interest in an Arctic export route may also be a sign of continued opposition to the U.S.-backed Baku-Tbilisi-Ceyhan pipeline, which offers access to a warm-weather port.

Boston, 16 August 2002 (RFE/RL) -- Russia's top oil companies may combine forces in the Arctic port of Murmansk to boost petroleum exports to the United States, news agencies reported this week.

Mikhail Khodorkovskii, chief executive of Russia's second-largest oil giant Yukos, said in Moscow that the firm is considering a LUKoil plan for a new export terminal at Murmansk that could ship 1 million barrels of crude per day to the West.

LUKoil, Russia's largest oil firm, first floated the port plan in May during a Moscow summit, where Presidents Vladimir Putin and George W. Bush signed a joint declaration on creating an energy partnership. Since then, analysts have been surprised at Russia's speed in promoting oil exports to the U.S. market.

Shortly after Yukos's first oil delivery from the Black Sea port of Novorossiisk in early July, the company announced it would make regular monthly shipments. Critics had previously said that Russian routes to the United States would be too costly and too long. Russian oil companies see Murmansk as a possible way out.

LUKoil has already approached the state pipeline company Transneft about building a line to Murmansk on the Barents Sea and expanding facilities at the port, which is also home to the Northern Fleet. LUKoil has invited other companies to join in the project, and Khodorkovskii's statement is seen as a sign that rival Yukos may accept.

Khodorkovskii said on 14 August: "We have asked our colleagues from LUKoil to send us a Murmansk route project, which we are currently studying. So far it does not seem an unrealistic project."

The Yukos endorsement could prove important to the project because of the high price of pipeline construction, news agencies reported. A line of some 1,000 kilometers from Siberian oil fields at Ukhta has been in planning stages since at least 1998, according to the London-based "Petroleum Economist."

Not all the Russian reaction to the plan has been positive. On 15 August, the business daily "Vedomosti" quoted Transneft's vice president, Sergei Grigoriev, as comparing it to the U.S.-backed Baku-Tbilisi-Ceyhan pipeline from the Caspian to the Mediterranean Sea.

Grigoriev said that the new oil export route "risks being the new Baku-Ceyhan: It demands a lot of financing and is only oriented at the U.S. market." Transneft is apparently concerned that it would not control exports from the Murmansk terminal.

It is unclear whether alternate schemes are being considered. By 2010, LUKoil plans to produce 22 million tons of oil per year from the Timan Pechora Basin bordering the Barents Sea, according to a May report by Platt's Oilgram news service.

One advantage of Murmansk is that its deep water could handle 300,000-ton tankers, reducing shipping costs. In May, LUKoil Vice President Leonid Fedun said that transport costs of $28 per ton could compete with oil from the Persian Gulf. He noted that the outlet was considered the best for exports to the United States in Soviet times.

The port itself is ice-free with berthing depths of 11.5 meters and potentially reaching 16 meters, according to promotional materials. Murmansk currently ships oil throughout the Arctic region, using supplies delivered by rail.

The plan is roughly in line with several Russian trends. In addition to the U.S. energy partnership, Russia plans to raise its oil exports by more than 20 percent in the next three years to 4.3 million barrels per day, a Reuters government forecast reported this week. The plan confirms Russia's intention to act independently, despite statements of cooperation with the Organization of the Petroleum Exporting Countries.

Russia is rapidly expanding port capacity for oil exports with the recent start of work on a terminal in the Gulf of Finland on the island of Vysotsk, after opening a new port at nearby Primorsk last year.

Transneft is also trying to link Russia's Druzhba main export lines to the Adria network so that it can export from Croatia's deepwater port at Omisalj into the Mediterranean. Like a planned project through Greece, the outlets could ease oil traffic through the Bosporus. Supporters of the Murmansk route have cited the same benefit.

But despite the U.S. partnership, all the plans assume that Russia will continue to shun the Baku-Tbilisi-Ceyhan pipeline, raising doubts about the limits of the policy. The project, which is due to be launched officially next month, also aims to increase oil exports to the West and bypass the Bosporus. But Russia has opposed the link through Azerbaijan and Georgia for the past eight years.

Moscow has reportedly barred LUKoil from joining the project, although the company has said it may use the line to ship oil once it is built, since it owns a share of the oil fields that will feed it. But the government's objections has apparently prompted plans for new northern routes like Murmansk instead of a warm-water port like Turkey's Ceyhan.

In May, Russia and Georgia announced a joint venture to build a link to Baku-Tbilisi-Ceyhan from Novorossiisk, to give it export access that would be unaffected by winter storms. Since then, there has been little sign of progress on the plan.

Grigoriev's comment suggests that Russia's distaste for the route is continuing, along with moves to reach Western markets by other means.