RUSSIA - Proposed Export Routes & P/L Expansions.

The Baltic Pipeline System (BPS) came on stream in December 2001 carrying crude oil from West Siberian and Timan-Pechora oil provinces westwards to the newly completed terminal of Primorsk in the Russian Gulf of Finland. The BPS gives Russia a direct outlet to North European markets, allowing the country to reduce its dependence on transit routes through the three Baltic states - Estonia, Latvia, and Lithuania. The growth of the BPS has come at considerable cost, as Russian crude oil which traditionally moved through the Baltic region has been re-routed through the BPS.

Throughput capacity at Primorsk has risen steadily, reaching 1.5m b/d during 2007. With the usage of larger-sized Baltimax tankers, throughput from the port continued to increase in 2008. Although the port's export capacity is said to be around 3m b/d, pipeline capacity to the port keeps exports constrained.

The Baltic Pipeline System-II (BPS-II) expansion will add new export outlets to the region, and in May 2008 Moscow decided that a new line will run to the port of Ust-Luga with a branch going to the Kirishi oil refinery.

The first phase of the BPS, designed to transport crude oil from both Russia's oil-producing regions and Kazakhstan, was commissioned in 2001. Transneft has estimated the cost of the second phase to Ust-Luga at around $3.3 bn.

Russia's product line operator Transnefteproduct began shipments of oil products from Primorsk in May 2008. Exports of around 180,000 b/d of products (8.4m t/y) were originally expected to begin during the third quarter of 2007. International shipping from the northern port of Murmansk has two advantages: the port is ice-free most of the year, and it is deep enough to make shipping to the US economic without reloading in Europe. Several pipeline proposals connecting the Murmansk area to existing producing areas in the south in the last several years have been met with lukewarm reactions by Transneft.

Transneft now plans a pipeline to Indiga, 240 miles from the Timan-Pechora producing basin, which is closer but iced-over in winter. No timeline has been set for the construction. Crude oil from Timan-Pechora has a lower sulphur content and is lighter than the rest of the Urals blend. Now, Russian crude oil is delivered to the Murmansk area by rail, and in 2007 around 270,000 b/d of crude oil and products were shipped from that area.

LUKoil completed its $1 bn, 240,000 b/d terminal at Varandei in mid-2008, which is allowing shipments from the northern part of Timan-Pechora. LUKoil's major source of crude oil for this terminal is the Yuzhno-Khylchuyu field where production began recently and is expected to rise to 150,000 b/d by end-2009.

Druzhba Pipeline & Adria Reversal Project: Of the 1.3m b/d of crude oil pumped via the Druzhba pipeline, only around 350,000 b/d flow south to Hungary, the Czech Republic and Slovakia. Reversal of the Adria pipeline between Croatia's port of Omisalj on the Adriatic Sea and Hungary has been under consideration since the 1990s. The pipeline, completed in 1974, was originally designed to load Middle Eastern crude oil at Omisalj, then pipe it north to Yugoslavia and on to Hungary.

However, given both the Adria pipeline's existing inter-connection with the Russian system and Russia's rising output, the pipeline's operators and transit states have since considered reversing the line's flow, thus giving Russia a new export outlet on the Adriatic Sea. The proposal included expanding its capacity from 100,000 b/d to 300,000 b/d at a cost of around $320m. But in 2005, Croatia said an environmental impact study of such a reversal was incomplete and not based on enough expert knowledge, thereby killing the proposal. During the Belarus-Russia oil dispute in 2007, Hungary said that it could technically reverse its portion of the pipeline within 20-30 days.