In the end of April, high-level Russian and Chinese officials signed documents to commence the work on extending the Eastern Siberia to Pacific Ocean oil pipeline into China.

The Siberian pipeline construction project calls for building an additional segment of the Eastern Siberia to Pacific Ocean (ESPO) pipeline that would cross the Russian border into China from the town of Skovorodino in Amur region.

Russia had intentions to build the pipeline to China since the late 1990s. First, the project was undertaken by Yukos and then Transneft. A popular version of why the attack on Yukos happened in 2003 had to do with the company’s work on the Russia-China pipeline.

The current pipeline project has encountered some resistance in Russia itself, particularly from the Russian Railways (RZhD). The delivery of petroleum products to China by rail was threatened by the construction of the pipeline.

An intergovernmental agreement providing for the building of a Chinese arm of the ESPO oil pipeline was signed on April 27, 2009. During the signing, the head of Rosneft Sergei Bogdanchikov noted that the document constituted “one of the largest contracts in the history of mankind.” The agreement was signed by the head of Transneft Nikolai Tokarev and Vice President of CNPC Wang Dongjin.

The pipeline’s capacity should reach 30 million metric tons per year, and the cost of the project is estimated at RUR 420 billion, which includes the outlays for constructing a terminal at Kozmino.

The new EPSO project is a result of negotiations between those who support supplying East Siberian oil to the Russian Far Eastern ports and those who favor supplying petroleum products to China. The project envisions supplying through ESPO oil from Eastern Siberia through the pipeline at Skovordino. From there, up to 15 million tons of oil will be delivered to China through the pipeline, while the remaining volume will be shipped by railway to the port of Kozmino.  

Presently, Russia supplies nine million tons of crude oil per year to China. It is unclear at this point what portion of the oil will be shipped to China by rail, as opposed to through ESPO. As Russian Deputy Prime Minister Igor Sechin noted, the costs of RZhD shipments will be factored into the analysis while devising the shipping schedule. The shipping schedule will be prepared in early 2010. The ESPO will function in a railway-pipeline mode until 2014, when ESPO-2 will come online. At this point, no plans exist for extending the pipeline running from Skovorodino to China any further.

In addition to Tokarev, Bogdanchikov, and Deputy Prime Minister Sechin, members of the Russian delegation included the Director of the Federal Customs Service Andrei Belyaninov and high executives of the United Shipbuilding Corporation.

The Russian segment of the pipeline will terminate two kilometers from the bank of the Amur River. The section of the pipeline going across the river to China will be the responsibility of CNPC. During a speech at the opening ceremony, Vice President of CNPC Wang Dongjin called the project “the great pipeline.” China gave Transneft and Rosneft a USD 10 bln. loan to complete the pipeline.