Russian oil pipeline operator OAO Transneft (TRNFP.RS) is scaling back by 24% the capacity of a politically sensitive pipeline project as the country's oil production plateaus and amid high oil-transport fees.
Transneft has cut the planned throughput of the Baltic Pipeline System-2 to 38 million tons a year, it said Friday in its third-quarter financial results. Previously the 998-kilometer project was meant to carry 50 million tons a year, according to Transneft's Web site.
Then-President Vladimir Putin conceived of the project as another alternative export route to the Druzhba, or "friendship," pipeline, which brings oil to central and eastern Europe. Russia shut off oil to Belarus in 2007 over a fee dispute. The Baltic Pipeline System-2 will take oil from near Russia's border with Belarus and Ukraine and deliver it northward to Ust-Luga on the Baltic Sea.
"It is an open secret here that this pipeline will be impossible to fill without diverting crude from Druzhba," said Chirvani Abdoullaev, oil and and gas analyst at Alfa Bank in Moscow.
Meanwhile, Transneft's oil-transport fees are rising even as Russian production levels off at around 10 million barrels a day, the most since the breakup of the Soviet Union.
"It may well be an attempt by Transneft to scale back their expansion and tame tariff increases," Abdoullaev said. "They are rising every year and are a major irritant for oil companies that argue that tariffs should be contained."
OAO Surgutneftegaz, Russia's fourth-biggest oil producer, may have to pay for a 172-kilometer branch of the BPS-2 line to be built to its Kirishky refinery, Vedomosti reported today.
Transneft spokesman Igor Demin was not immediately available to comment on the pipeline capacity cut. Demin declined to comment to Vedomosti.