April 11, 2014 / 2:10 PM / 3 years ago

Transneft aims to ship Central Russian oil to Asia by 2020

3 Min Read

* Russia has decreased crude oil exports to Europe

* Putin urges closer cooperation with Asia

By Vladimir Soldatkin

MOSCOW, April 11 (Reuters) - Russian oil pipeline monopoly Transneft said the government had told it to build infrastructure to ensure that Central Russian oil can flow to the Far East, which could lead to cuts in supplies to Europe.

Russia has been ramping up its crude oil supplies to Asia, including to China, as President Vladimir Putin urges domestic companies to forge close ties to the East. At the same time, Europe has been trying to reduce its dependency on Russian oil and gas, and those efforts have stepped up during the Ukraine crisis.

Transneft First Vice President Maxim Grishanin told financial analysts and reporters the company had already been working to connect oil fields in the Volga and Urals regions to the East Siberia-Pacific Ocean (ESPO) pipeline.

"We will implement this possibility by 2020, and the flows could (then) be comfortably switched in any direction," he said.

Russia ships around 16 percent of its crude exports to Asia, and by 2035 Moscow aims to double that share to a third, but its plans are constrained by the a lack of sufficient pipeline capacity.

To boost the flows to Asia, Russia has sped up plans to expand ESPO's annual capacity to 80 million tonnes (1.6 million barrels per day) by 2020, 10 years earlier than initially envisioned. This target compares with ESPO's current capacity of about 1 million bpd and total Russian oil exports of around 4.4 million bpd.

Grishanin said the government ordered Transneft to expand ESPO to the west in February, when the company's investment programme was discussed. It is budgeted to invest a total of almost 2 trillion roubles ($56.3 billion) by 2020.

Russia has been gradually reducing west-bound flows in favour of Asia and of the domestic market as its refineries produce more oil products.

Western sanctions over Russia's annexation of Crimea have been limited mainly to individuals, but the European Union has also stepped up discussions over potential ways of reducing dependence on Russian energy.

$1 = 35.5008 Russian Roubles editing by Jane Baird

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