Transneft' AK : RF Government Order Fixing the Phases of the Kuyumba – Taishet Oil Pipeline Construction Amended

An amendment to RF Government Order No. 532-р dated 17 April 2012 and fixing the phases of the Kuyumba-Taishet oil trunk pipeline (OTP) construction was published. The oil pipeline will link the Kuyumba and Yurubcheno-Tokhoma fields to the Eastern Siberia - Pacific Ocean Pipeline System (ESPO PS).

As per the document, the project will be implemented in two phases. Train 1 of the oil pipeline with the capacity of 8.6 million tons will be brought online in Q4 2016. Phase 2 provides for oil pipeline design and construction to boost the delivery capacity to 15 million tons, with expected completion in Q4 2023.

The order was signed by Dmitry Medvedev, Prime Minister of the Russian Federation, on 19 January 2016.

When making a decision to construct the Kuyumba-Taishet oil trunk pipeline in 2011, senior executives of Rosneft Oil Company, OJSC, TNK-BP, JSC (the latter afterwards amalgamated with Rosneft), Gazprom Neft, JSC (nowadays Gazprom Neft, PJSC) sent to Transneft a circular that outlined the planned crude production volumes of 15 million tons at the Yurubcheno-Tokhoma and Kuyumba fields and called for construction of an oil pipeline with the relevant delivery capacity. Based on the volumes specified, the RF Government prepared an order dated 17 April 2012 on bringing online the Kuyumba - Taishet oil trunk pipeline with the annual capacity of up to 15 million tons of crude in Q4 2016.

In line with the order, Transneft finished the pipeline design in October 2013, providing for construction of the following facilities to ensure oil transportation at 15 million tons annually:

• an oil pipeline (diameter 530 mm) from PEPS No. 21 to PS No. 2;

• an oil pipeline (diameter 720 mm) from PS No. 2 to PEPS Taishet;

• four PSs, two of them (PEPS No. 21 and PS No. 22), with the tank fleet of 160,000 m3, to ensure oil acceptance from Vostsibneftegaz, OJSC (affiliated with Rosneft, OJSC) and Slavneft Oil and Gas Company, JSC (controlled by Rosneft and Gazprom Neft) for further transportation towards PEPS Taishet.

Contracts for delivery of pipes with the required diameter were entered into in September 2013, whereas in December 2013 Transneft commenced construction and installation. In 2015, Rosneft and Slavneft signed preliminary contracts of crude transportation services via the Kuyumba - Taishet oil pipeline; under the contracts, the crude delivery cap above 11 million tons annually is expected into the pipeline starting from 2024.

To optimize the capex, Transneft adjusted the commissioning dates for facilities of the Kuyumba -Taishet OTP as to ensure the required pipeline delivery capacity according to the crude delivery volumes and dates set forth in the preliminary contracts. For a number of causes, the oil pipeline capacity can only be achieved by altering the commissioning dates of the two oil pump stations (PS No. 23 and PS No. 4). This is due, among other things, to impossibility of changing the pipeline diameter, since linear portion welding, laying and backfilling operations, hydraulic testing and in-line inspection have been completed by now.

Putting into service the 530-mm diameter oil pipeline in the section from PEPS No. 21 to PS No. 2, the oil pipeline from PS No. 2 to PEPS Taishet, and two oil pump stations (PEPS No. 1 and PS No. 2) will bring the annual delivery capacity of the Kuyumba -Taishet OTP up to 8.6 million tons. Commissioning of the facilities will enable crude transportation in the volumes specified in the preliminary contracts through to 2023. The lag between transportation volumes and the pipeline capacity will be offset in 2022-2023 by using a drug-reducing additive.

Bringing online PS No. 23 and PS No. 24 is proposed for 2023, which will ensure the Kuyumba - Taishet pipeline delivery capacity of up to 15 million tons annually, starting from Q4 2023. If only one of the above two oil pump stations is commissioned, the oil pipeline capacity of up to 10.6 million tons annually would be achieved. As per the preliminary contracts, the crude delivery volumes may exceed the specified figures by 20%. Thus, by 2024 the delivery capacity of the Kuyumba - Taishet oil pipeline shall not be below 14 million tons.

The updated requests from oil companies indicate the following oil delivery volumes to the Kuyumba - Taishet OTP: 660,000 tons in 2017, followed by 1,072,000 tons in 2018 and 4,138,000 tons in 2019.

Amending the RF Government order of 17 April 2012 will enable to streamline the capex during construction of the Kuyumba - Taishet OTP in view of the adjusted crude delivery volumes and dates.