Yukos Turns on the Tap

Russia's Yukos has agreed to crank up crude rail shipments to China from 60,000 b/d last year to 130,000 b/d in 2004 and to 180,000 in 2005. The two sides are now discussing a long-term contract to boost rail shipments this summer to 200,000 b/d during 2006-12.

The contracted rail volumes are standing in for a crude pipeline to China that Yukos had wanted to build but Moscow has not yet sanctioned. The Russian government has yet to decide between building either the line to China or a competing scheme to the Pacific port of Nakhodka. The Kremlin appears to favor the latter option.

PetroChina, meanwhile, plans to go ahead with building the Chinese section of the pipeline itself. When completed, the Chinese would take crude delivered by rail at the border and reload it into the pipeline, thereby reducing the cost of shipping the crude to Chinese refineries.