Page 7 - AsianOil Week 16 2022

AsianOil COMMENTARY AsianOil

At the Far Eastern port
of Kozmino oil can be
loaded onto tankers for
export across the Asia-
Pacific region.

Oil markets. But there are clear infrastructure bot-
With the permanent loss of the European mar- tlenecks that would have to be overcome. For
kets now a very real possibility that may happen years, ESPO has usually operated at close to its
in the next year, Russia is rapidly refocusing on full capacity, despite successive expansions.
building up what eastward-orientated pipeline ESPO could be expanded again to handle
infrastructure it has. extra deliveries to Asian markets, along with the
Russia delivers its crude oil to Asian markets pipelines that feed it. But this would bear a sig-
via the Eastern Pacific-Siberian Ocean (ESPO) nificant cost and could take years to implement.
pipeline, which has a capacity of 80mn tonnes After all, it took a decade for Russia to expand
per year (tpy), or 1.6mn bpd. ESPO consists of a ESPO from the initial 600,000 bpd capacity
main pipeline that runs to the Far Eastern port it had when it was opened in 2009 to 1.16mn
of Kozmino, where oil can be loaded onto tank- bpd,at a cost of over RUB100bn ($1.2bn).
ers for export across the Asia-Pacific, and a spur Russia could also send extra oil and oil prod-
that runs into China. However, this pipeline is ucts to Asia via railway, although capacity has
already working at full capacity, so any expan- already been strained due to the pandemic, and
sion of this would mean building a new pipeline. Europe’s impending coal ban has not helped

The other main option for crude deliver- matters. It could also deliver more oil from its
ies to China is through Kazakhstan, via the Baltic and Black Sea ports, without having to
400,000 bpd Atasu-Alashankou pipeline. invest in extra capacity. But sanctions have made
Atasu-Alashankou was originally built to han- it difficult for Russian companies to hire tank- The other main
dle Kazakh oil, but since those shipments have ers – international tanking companies would
fallen significantly in recent years, currently be easy to target with secondary sanctions and option for crude
amounting to only 20,000 bpd, the pipeline has close this option off to Russia – and the situation deliveries to
been repurposed for transiting Russian supplies. could get worse if these sanctions are tightened.
Employing tankers is another immediate China is through
and cheap option, as utilising the existing ports Gas
would not require any new investment. Among Some 70% of Russia’s gas exports go to Europe Kazakhstan, via
the tanker projects, Russia can dispatch some of and as almost all of this flows through fixed pipe-
its crude directly to Asian markets on tankers, lines, changing the direction of gas flows to new the 400,000 bpd
including the 240,000 bpd Sakhalin-1 project markets is a major headache. Russia will find it Atasu-Alashankou
in the Far East and the 160,000 bpd Novopor- even harder to divert its gas supplies to Asian
tovskoye field in the Arctic. Russia’s only other markets. pipeline.
option for oil and oil product supplies to east- Russia only established a pipeline connection
ern markets is by rail, which is relatively uneco- with China in late 2019: the 38 bcm per year
nomic, but was used in the past by Yukos to sell Power of Siberia, which delivers gas produced
oil to China two decades ago. at the Chayandinskoye field, and in a few years
The advantage of both ESPO and the Kazakh it will handle supplies from the nearby Kovykt-
route is that they can be used to send oil not only inskoye field as well, both of which are located
from Russia’s newly developed fields in Eastern in Eastern Siberia. With Power of Siberia cur-
Siberia but also from fields in Western Siberia rently sending only 10.5 bcm per year of gas to
that until now have primarily served European China, Russia will be able to ramp up supplies by

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