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. Last Updated: 07/27/2016

Transneft Lays Plans To Bypass Chechnya

The board of directors of Russia's national oil pipelines operator, Transneft, will consider Tuesday the financing and construction of a pipeline to bypass Chechnya. The company plans to spend $150 million to $180 million on the project, officials said.

Transneft has been ready since last week to lay the first 7 kilometers of the 250-kilometer pipeline to transport Caspian Sea crude oil through Dagestan to the Black Sea port of Novorossiisk, Deputy Fuel and Energy Minister Vladimir Stanev said. Construction began three weeks ago.

"Transneft plans to finance the bypass construction from its own resources," Stanev said. "But the company later plans to introduce an investment tariff to pay back the [construction] expenses over a period of 6 to 7 years after the [pipeline's] commission." The stretch should be finished by summer 2000.

Transneft reports consolidating 7.665 billion rubles ($312.9 million) of retained earnings on 22,452 billion-ruble revenues for the first nine months of this year. Pretax profit was reported at 10.486 billion rubles over the same period. Transneft also accumulated about 2.7 billion rubles in cash by October.

"Transneft has enough resources to construct the pipeline with its own funds," said Vladimir Nosov, an analyst with Fleming UCB investment bank. The company has been developing plans for the pipeline since 1997 and has set aside about 80 kilometers of pipes for the bypass construction.

Azerbaijan, Turkmenistan and Russian firms operating in the Caspian would be willing to use the existing 830-kilometer pipeline to Novorossiisk when it is working again, Stanev said. Kazakhstan will also possibly join the line with its crude volumes shipped via the port of Makhachkala on the Caspian Sea, he added.

Transneft had agreed to transport 2.2 million tons of Azeri crude to Novorossiisk for $15.67 per ton in 1999. But the 100,000-barrel-per-day pipeline has been shut since mid-summer due to the situation in Chechnya. Therefore, crude currently travels by rail from Makhachkala.

The projected bypass will cross the Caspian Pipeline Consortium pipeline, which is due to link the Tengiz oil field in Kazakhstan and a new Black Sea export port near Novorossiisk. CPC executives said their pipeline will be empty until Dec. 23, 2000, but further cooperation in crude transport between both stretches is possible.

Transneft exported about 108 million tons of crude outside the Commonwealth of Independent States in the first 11 months of 1999, Prime-Tass reported. Last year, Transneft transported about 295.9 tons of oil in total, about 97 percent of Russia's total crude production.

Construction of a 150-kilometer pipeline parallel to the Ukrainian border between the Sukhodolnaya and Rodionovka compressor stations in Western Russia is unlikely to start before end 2000, Stanev said. The project aimed to bypass Ukraine for crude transshipments by Transneft to Novorossiisk is expected to cost about $100 million.