ESPO Pipeline Expansion Nears Completion, Asia-Pacific Counts for a Third of Russian Oil Shipments

MOSCOW (Reuters) — Russia is about to complete a fresh expansion of its oil pipelines to the Pacific coast that will cement its role as a top Asian supplier and allow it to ship a third of its total oil exports to Asia-Pacific markets. 

Over the past decade, Russia launched a major oil pipeline to China, which today is shipping 600,000 barrels per day (bpd), and opened the new port of Kozmino on the Pacific, exporting over 600,000 bpd. Russia is also shipping 200,000 bpd to China via a pipeline crossing Kazakhstan.

Next month, Russia plans to expand the pipeline connecting its east and west Siberian fields with China, Kozmino and local refineries - known as the East Siberia–Pacific Ocean (ESPO) - by another 100,000 bpd.

The link will then reach its full designed capacity of 1.6 million bpd.

Just 10 years ago, Russia, the world’s second largest oil exporter after Saudi Arabia, was barely sending any oil to Asia with most of its oil exports flowing to the West.

But as tensions between Russia and the European Union mounted and the Asian economies expanded, Russian President Vladimir Putin asked the government to diversify oil export routes.

Ten years later, China has become by far the largest buyer of Russian oil via new routes, securing 800,000 bpd of supplies by pipelines and buying large volumes from Kozmino.

The expansion of the ESPO link should further cement Russia's role as China's top supplier ahead of rivals such as Saudi Arabia and the United States.

Meanwhile, exports to the West, which have been the main source of export revenues for Russia and the Soviet Union since the 1960s, have declined by some 15 percent since 2005.

Russian domestic refining grew by more than 50 percent as Putin called on the industry to modernize and focus on exports of value added products rather than crude oil.

The diversification of export routes also allowed Russia to capture better prices for its crude – for most of the past decade crude in Asia was trading at a premium to Russia's western oil benchmark blend Urals.

Also, this year Russia is planning to launch its first major gas pipeline to China, which is poised to help the country to further diversify its energy exports.

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