Oil Tariff to China Seen Lower

The Federal Tariffs Service said it proposed keeping a low fee for pumping crude through a 2,700-kilometer pipeline to China, a step that could be aimed at speeding up the delayed project.

Transneft, which is building the 600,000-barrel-per-day pipeline from east Siberia to the Chinese border, has upped its forecast for the cost of the project, which will be launched in late 2009.

The tariff service has proposed setting the fee at $38.8 per ton, unchanged from its previous estimate, made before the project's costs almost doubled to over $12 billion, said Denis Volkov, head of the service's oil and gas department.

"This is today's estimate," Volkov said Monday, adding that the preliminary proposal had been submitted to the government last week and could still be changed after discussions with relevant ministries.

He said the government had yet to reply to the suggestion. Last year, the Economic Development and Trade Ministry said the tariff would not exceed $50 per ton. Transneft declined to comment.

The tariff is crucial for the oil companies that will ship crude through the pipeline and for Transneft, which needs the fee to recover the money it spends on building pipelines.

Transneft has revised the cost of the pipeline from the initial $6.6 billion after changing the route to make it longer and citing higher costs of pipes and services.

One analyst said the unchanged tariff was aimed at encouraging oil firms to invest in exploration in east Siberia, where production is needed to replace dwindling output in west Siberian fields.

"The tariff was set at a level to make oil companies interested," said Valery Nesterov, of Troika Dialog.

Transneft, which had planned to complete the pipeline by the end of this year, said it was likely to delay the launch by at least nine months to the third quarter of 2009 due to construction delays.

Rosneft is expected to become the main crude supplier to the planned pipeline. Other oil firms developing deposits in east Siberia are Surgutneftegaz and TNK-BP.