the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
system and bypass Belarus, which was involved in oil transit disputes with Russia in 2006 and 2010. The
1,016km-long BPS-2 pipeline will transport some 1mn b/d of oil from Unecha, close to the border with
Belarus, to Ust-Luga and from there the crude will be transported on by tanker. The construction of the
pipeline is expected to be completed in 2012 at a cost of around US$3.9bn.
The construction of the new pipeline demonstrates Russia's strategy of diversifying its oil and gas export
infrastructure, bypassing its traditional transit countries – Belarus, Poland and Ukraine. The pipeline's
construction was not welcomed by these transit countries, whose positions will be weakened as the new
pipeline allows Russia to supply more oil directly to Western Europe. Once the BPS-2 pipeline becomes
operational, Russia is likely to reduce supplies through the Druzhba oil pipeline.
Druzhba
The Druzhba pipeline, one of Russia’s main oil export routes, was completed in 1964 and currently has a
capacity of around 1.4mn b/d. The Russian section of the pipeline begins in the Republic of Tatarstan,
which serves as a gathering point for oil from other regions and from Kazakhstan. The pipeline runs west
to Unecha in Bryansk Province where it splits into two.
A spur known as the Northern Druzhba continues north through Belarus and Lithuania where it formerly
supplied the Novopolotsk and Orlen Lietuva (Mažeikių) refineries and the Ventspils and Butinge oil
terminals. The Northern Druzhba pipeline was closed in 2006 when Russia claimed it had been damaged.
It has not yet been repaired. The main Druzhba pipeline continues to Mozyr in Belarus, where it splits
into the Western Druzhba, with a capacity of up to 1mn b/d, and the 1.2mn b/d Southern Druzhba.
LNG Terminals
Western Druzhba crosses Poland and then runs into Germany, while Southern Druzhba leads into Ukraine
and from there into central and south-eastern Europe. The presence of a large number of transit countries
has led to risks of disruption to supply, particularly in Belarus, which has been in dispute with Russia
over energy imports several times.
Sakhalin-II
Russia’s first LNG export terminal, Sakhalin-II, came onstream in March 2009. The second major area
for LNG is the Barents Sea and the Yamal-Nenets Autonomous Region. The most advanced project is the
offshore Shtokman field, which is being developed by Gazprom in partnership with French major Total
and Norway’s Statoil. The project, which will supply pipeline gas to Europe and LNG to Europe and
North America, has estimated costs of US$30bn. Some 70-80% of the LNG will be sold under long-term
contracts, with Spain a likely buyer. A consortium led by Norway’s Aker Solutions won the EUR25mn
FEED contract for the floating production unit (FPU) at Shtokman in February 2009. Italy’s Technip is
undertaking the FEED for the onshore gas facilities including the LNG plant.
Shtokman LNG (Planned)
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