Page 4 - FSUOGM Week 16 2022

FSUOGM COMMENTARY FSUOGM

Moscow's race against time

to divert energy exports from

Europe to Asia

The scramble to shift gigantic volumes of oil and gas to Asian markets will
likely take many years and tens of billions of dollars

RUSSIA EUROPE’S unprecedented push to sever all to handle Kazakh oil, but since those shipments
energy ties with Russia has left Moscow scram- have fallen significantly in recent years, currently
WHAT: bling to reorientate its vast oil, gas and coal amounting to only 20,000 bpd, the pipeline has
Russian President exports to Asian markets. But achieving such a been repurposed for transiting Russian supplies.
Vladimir Putin has monumental feat would likely take years, not to Other oil projects in Russia can dispatch
ordered his government mention tens of billions of dollars in new infra- some of their crude directly to Asian markets
to draft a plan to divert structure, and Asian buyers may simply not have on tankers, including the 240,000-bpd Sakha-
oil and gas supplies that the appetite for the extra supplies. Nevertheless, lin-1 project in the Far East and the 160,000-bpd
go to Europe to Asian Russia finds itself in a race against time to redi- Novoportovskoye field in the Arctic. Russia’s
markets instead. rect energy flows eastwards before taking too only other option for oil and oil product supplies
great a financial hit from Europe rejecting them. to eastern markets is railway, which is relatively
WHY: Russian President Vladimir Putin has uneconomic.
Europe has vowed to end ordered his government to draw up plans for The advantage of both ESPO and the Kazakh
its reliance on Russian building the necessary energy infrastructure by route is that they can be used to send oil not only
oil and gas as quickly as June 1. Russia’s existing infrastructure is heavily from Russia’s newly-developed fields in Eastern
possible. geared towards serving European markets. The Siberia but also from fields in Western Siberia
Soviet-era Druzhba pipeline and Russia’s north- that until now have primarily served European
WHAT NEXT: west and Black Sea typically deliver around 5mn markets. But there are clear infrastructure bot-
Quick solutions are not barrels per day of oil, condensate and other tlenecks that would have to be overcome. For
possible, especially for petroleum products, while only about 2mn bpd years, ESPO has usually operated at close to its
gas. The infrastructure are shipped to markets in Asia. Likewise, Rus- full capacity, despite successive expansions.
requirements for this sia’s pipelines sometimes send over 200bn cubic ESPO could be expanded again to handle
shift was colossal. metres of gas to Europe, whereas China – the extra deliveries to Asian markets, along with the
only other major market with a pipeline link to pipelines that feed it. But this would bear a sig-
Russia – took only 10.5 bcm last year. Russia’s nificant cost and could take years to implement.
two main LNG export terminals in the Arctic After all, it took a decade for Russia to expand
and in the Far East can deliver an additional ESPO from the initial 600,000-bpd capacity
38 bcm of gas on tankers to markets across the it had when it was opened in 2009 to 1.16mn
world, but mainly Asia. bpd,at a cost of over RUB100bn ($1.2bn).
In percentage terms, Europe typically Russia could also send extra oil and oil prod-
accounts for around 60% of Russia’s oil and oil ucts to Asia via railway, although capacity has
product exports and 70% of its gas exports. already been strained due to the pandemic, and
Europe’s impending coal ban has not helped
Oil matters. It could also deliver more oil from its
Russia delivers its crude oil to Asian markets Baltic and Black Sea ports, without having to
via the Eastern Pacific - Siberian Ocean (ESPO) invest in extra capacity. But sanctions have made
pipeline, which has a capacity of 80mn tonnes it difficult for Russian companies to hire tankers,
per year, or 1.6mn bpd. ESPO consists of a main and the situation could get worse if these sanc-
pipeline that runs to the Far Eastern port of Koz- tions are tightened.
mino, where oil can be loaded onto tankers for
export across the Asia-Pacific, and a spur that Gas
runs into China. The other main option for Russia will find it even harder to divert its gas
crude deliveries to China is through Kazakh- supplies to Asian markets.
stan, via the 400,000 bpd Atasu-Alashankou Russia only established a pipeline connec-
pipeline. Atasu-Alashankou was originally built tion with China in late 2019: the 38 bcm per

P4 www. NEWSBASE .com Week 16 21•April•2022