Russia’s New Step Forward: The Export of Crude Oil Starting Up to the Asia-Pacific

|Russia

Crude oil exports from the Japan Sea coast of the Russian Far East, which will be the first to the countries of the Asia-Pacific including Japan and the ROK, will begin at the end of December. This is because the pipeline connecting the Siberian oil-field zone and the Russian Far East has been completed to the halfway point and the aim has been set of conveying oil by rail to the Japan Sea coast of the Russian Far East. For the foreseeable future 15 million tonnes of crude oil will be exported annually to Japan, the ROK and others. In three years time the pipeline to the Japan Sea coast of the Russian Far East will have been completed, and it is planned to increase the amount to 50 million tonnes annually.

At the same time, Russia is also progressing with the construction of a branch pipeline to China, and next year (2010) will commence exports of crude oil via this pipeline. If all goes smoothly, it is planned to export 80 million tonnes of crude oil annually to the countries of the Asia-Pacific, including 30 million tonnes to China.

The plan to export the crude oil extracted in Siberia to the Asia-Pacific region is also a focus of attention in Japan. Nonetheless the significance is great of a provisional commencement of business, with pipeline and railway combined, becoming a reality.

Russia has designated the development of Siberia and the Russian Far East as a national project of the utmost importance, and has pushed ahead the scheme for the development of the resources in those regions and the export of the crude oil extracted there to the Asia-Pacific region. For several years they have been accumulating results in exporting the crude oil extracted off the coast of Sakhalin to Japan and the ROK, and Siberian crude oil to China by rail. With limited quantity and export destinations, however, it couldn’t have been said that there was genuine expansion into the Asia-Pacific region. This time around matters are greatly beyond compare. This is Russia’s genuine expansion into the energy markets of the Asia-Pacific region, which is continuing growth.

While the concept for conveying the crude oil extracted in Siberia by pipeline to the Japan Sea coast of the Russian Far East and thence exporting it by tanker to the countries of the Asia-Pacific has been around since the era of the Soviet Union, discussion began in earnest nearly ten years ago. The twists and turns continue, including changes of route, the rising construction costs, and the fierce battle between Japan and China over priority in the starting of construction work; business will begin one year later than planned, some three years after the start of construction. In four years time (at the end of 2013) there is also a plan to complete the refinery adjacent to the pipeline outlet, and to export high added-value products.

Russia is not just stopping at oil, and for energy resources too, such as natural gas and coal, it is thought that they want to construct new export outlets to the Asia-Pacific region. For example, construction is underway of a pipeline to Vladivostok for natural gas. Not only domestically, exports are also in sight in the future, and an LNG plant in the outskirts of Vladivostok is also being planned. Expectations are also high for the refinery and LNG project as energy cooperation and technological cooperation initiatives between Japan and Russia to continue on from the Sakhalin Projects.

Meanwhile, turning our gaze to the local level, it is the first large-scale project in a long while for the Russian Far East as well. Various development projects were launched only after the dissolution of the Soviet Union, but each time faded away due to fiscal difficulties and a change in policy at the center. It would be no exaggeration to say that not a single thing was realized, and it was always pie in the sky.

Prime Minister Putin has announced a policy for focused development of the Russian Far East. For example, Primorsky Krai, the final destination of the pipeline, is in the middle of a large-scale redevelopment for the 2012 APEC summit. The Russian Far East has a variety of problems including population decrease, an economic disparity with the center, chronic energy shortages, and population and economic pressure from China, and there is also the feeling of having been left high and dry by the center. The realization of a large-scale project amid such circumstances will be the first case demonstrating that the federal center’s emphasis on the Russian Far East is not just all talk.

How will they ensure sufficient crude oil for exporting with the delay in oil development? Will they really complete the pipeline to the Japan Sea coast? There are quite a number of difficult problems. It will take time to solve such problems, yet Russia has taken a new step forward.

[Translated by ERINA]