Putin signs order to build Baltic Pipeline System-2

The Baltic Pipeline System-2 with an estimated cost of 120-130 billion rubles ($4.3-4.7 billion) will run from western Russia's Bryansk Region to the Leningrad Region port of Ust-Luga with a branch going to the Kirishi oil refinery.

According to the document, the project will be funded through a long-term ruble-denominated bond issue by pipeline monopoly Transneft. The bonds will be placed through a private offering among state-controlled financial organizations.

The Energy Ministry along with the Ministry of Economic Development, the Regional Development Ministry, the Finance Ministry, the Federal Tariff Service and state-run VEB bank are to develop a model to fund the project within three months after Transneft has submitted a feasibility study.

Construction on BPS-2 is to be launched in 2009 and completed two years later. Oil will start to be transported in late 2012 with an initial pumping capacity of up to 30 million metric tons (220 million bbl), which will subsequently be raised to 50 million tons a year (367 million bbl).

The Russian premier earlier proposed that foreign partners use BPS-2 and that they buy shares in BPS-2's terminal at Ust-Luga.

The first stage of the Baltic Pipeline System, with a capacity of 12 million tons of oil annually and designed to transport oil from both Russia's oil-rich regions and Kazakhstan, was commissioned in 2001. Its current capacity is 75 million tons.

The BPS-2 project emerged during an oil dispute between Russia and Belarus in January 2007, when Russia cut off supplies to Europe for four days via the Druzhba pipeline after Belarus refused to let Russian oil pass through the country without payment of a transit duty.

Author: Ksenia Kochneva