Pipeline to China Cost Hits $12Bln

BEIJING -- The cost of an oil pipeline from Russia to China has risen to $12 billion, and the countries' struggle to agree on a pricing deal for a similar gas pipe could drag on for years, a Russian energy official said Wednesday.

A global escalation in raw materials prices and the depreciation of the dollar boosted the link's costs, said Vladimir Sayenko, deputy head of the fuel and energy department at the Industry and Energy Ministry.

"Currently we are talking about approximately $12 billion. This has to do firstly with the fact that pipes got more expensive, the dollar-to-euro exchange rate and some other global economic trends," he told an industry conference in Beijing.

Originally budgeted at less than $7 billion and recently quoted at around $11 billion, the spiraling costs meant an agreed price of near $40 per ton would now likely have to be renegotiated, he said.

But the project was still set for completion near an end-2008 target date, Sayenko said.

"It seems to me it will be built on time, maybe three months [delayed] -- not a great difference. The difference is the investment," he told journalists on the sidelines of the Sino-Russo-Kazakh Oil and Gas Forum in Beijing.

Industry and Energy Minister Viktor Khristenko said last month that the schedule to complete the first 600,000-barrel-per-day section of the pipeline by the end of 2008 was still in force.