Exxon Operator in Russia to Construct Pipeline to China

Sakhalin-1 operator, Exxon Neftegaz, intends to lay a 500km gas pipeline to China en route of currently constructed Okha-Khabarovsk pipeline, Kommersant reported.

The project value is $1 billion. But Gazprom may curtail this inspiration of Exxon Neftegas. The gas monopoly of Russia needs no competitor in delivering gas to Asia.

Khabarovsk Region?s Governor Viktor Ishayev vowed he will soon authorize Exxon Neftegas to explore the territory of the future route and to make out a preliminary feasibility study for the project. The region?s authorities and the company have signed documents, whereby Exxon Neftegas will cater for the annual gas shortage of 2 billion cu meters suffered by the region, the governor specified.

The sources say Exxon Neftegas may spend $10 million for elaborating a feasibility study for the pipeline, which annual capacity is estimated at 8 billion cu meters. But the project is yet to be sanctioned by Russia?s government.

For Exxon Neftegas, setting up additional transport routes is vital. So far, no portfolio has been established to ensure the sale of accompanying gas from Sakhalin-1. The only buyer is Khabarovsk region, but it needs no more than 3 billion cu meters to 4 billion cu meters a year. So, Exxon Neftegas is studying the chances to ship gas to India, China, South Korea and Japan.

But Gazprom may oppose Khabarovsk governor in this gas undertaking. The development program for the Far East and Eastern Siberia specifies no construction of such gas pipeline and the project isn?t in line with comprehensive development of the gas transport system in the eastern Russia, said a source with Gazprom.

Market players give another explanation. Gazprom needs no competitor in this direction, the more so that it is willing to lay there a gas pipeline with the annual capacity of 30 billion cu meters to 40 billion cu meters.