Transneft criticizes the VNHK project

The previously subsided conflict between the state-owned Transneft and Rosneft is flaring up with renewed vigor, now around the Eastern Petrochemical Company. Transneft sharply criticized the project, questioning the possibility and economic feasibility of financing the expansion of oil pipelines required for it. She estimates the cost of the work at 140 billion rubles, and the source of these funds is unclear. At the same time, the Transneft management does not see sufficient sources of raw materials for the project, but sees in it a threat of failure of the idea of creating a benchmark for East Siberian light oil.

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Drawing: Kommersant / Viktor Chumachev

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On September 3, Transneft President Nikolai Tokarev sent a letter to Deputy Prime Minister Arkady Dvorkovich (a copy is at Kommersant's disposal) in which he doubted the feasibility of Rosneft's project to create the Eastern Petrochemical Company (VNHK). The top manager for the first time estimated the cost of connecting the plant to the Transneft pipeline system: only for supplies within the first stage of the project with a refining capacity of 12 million tons of oil per year (Rosneft plans to complete it by 2020), investments of 139.7 billion rubles are required . “Transneft’s investment program does not provide for these events; there are no sources of financing for them,” he writes.

It is still unknown who will invest the funds. On Monday, Deputy Energy Minister Kirill Molodtsov said that it was not possible to resolve this issue at a special meeting, since the parties had not yet agreed on the technical conditions for connecting VNHK to the networks of natural monopolies. According to him, the Ministry of Energy expects proposals in September-October. Rosneft declined to comment on this issue, but Kommersant’s source in the company assured that “work on the VNHK construction project is being carried out in all necessary directions.”

In a presentation given by Rosneft CEO Igor Sechin to President Vladimir Putin on August 31, the company proposed including “external infrastructure facilities of VNHK” in the investment programs of natural monopolies. The same option is also considered by presidential aide Andrei Belousov in a letter to Mr. Putin (Kommersant has read the text) dated August 5. It says that the cost of infrastructure projects necessary for the operation of VNHK is 108.7 billion rubles. At the same time, among the projects listed by the official there is no connection of the plant to the ESPO pipeline, but there is a proposal to reduce the amount of budget funding. President Putin agreed with the provisions of this letter.

Nikolai Tokarev believes that the expansion of oil pipelines is possible by increasing the tariff for oil transportation. According to Transneft's calculations, cost compensation will require introducing a surcharge to the tariff for pumping via ESPO in the amount of 14.1% in 2015-2021, and 6.8% in 2022-2028. But in this case, the top manager admits, the expansion of the system for Rosneft will be paid for, among other things, by other oil companies. The FTS told Kommersant yesterday that the issue of additional tariff increases for ESPO has not yet been discussed.

This is not the first conflict between Transneft and Rosneft. They argued about the same thing for several months as part of the oil company’s plans to increase supplies to China. Only at the end of June, when Rosneft signed a final agreement on additional supplies and agreed to receive an advance payment of over $60 billion, sources close to both companies told Kommersant that the oil company had agreed to pay for the expansion of the pipeline system through a special long-term tariff.

But now the dispute has gone into a second round. In addition to financial issues, Nikolai Tokarev again raised the problem of oil shortages. In particular, the top manager is concerned about the possible decrease in supplies to the port of Kozmino (the end point of the ESPO) after the launch of VNHK and, as a consequence, the failure of the plan to create a benchmark for East Siberian light oil. Vitaly Kryukov from IFD-Capital agrees with these concerns. According to the analyst, all projects announced by Rosneft aimed at the Asian market are extremely promising, however, the company’s risks in them are high: the actual production volume of the state-owned company is now lower than necessary to implement the projects, and production at a number of large fields should only begin since 2016.

Anna Solodovnikova, Kirill Melnikov

"Rosneft" again does not fit into the pipe