Source: The Financial Times                       Date: 1 September, 2010

Prime Minister Vladimir Putin on Sunday opened a new pipeline to export east Siberian oil to China that will help Russia reorientate its oil trade towards the east. The pipeline, running 67 km from Skovorodino in east Siberia to China’s north-eastern frontier, is an offshoot of a new oil export route Russia is building to the Pacific Ocean, providing a strategic window on the fast-growing energy markets of Asia.

“This is a vital project for us as we begin to diversify our sales of strategic raw materials,” Mr. Putin said. “So far we have delivered most oil to Europe ... The Asia-Pacific region has received insubstantial volumes.” Russia began exporting oil this year from a new export terminal on the Pacific Ocean built to serve fields in east Siberia, one of the world’s last untapped oil provinces. Some Kremlin-friendly oil companies have been granted tax breaks to speed development of east Siberian reserves and offset a decline in production in other regions.

Transneft, the Russian oil pipeline monopoly, completed the construction of a pipeline from Taishet in the Irkutsk region to Skovorodino last year, the first stretch of a planned 2,757-km pipeline to the Pacific. On completion in 2012, the pipeline will be capable of carrying up to 1.6 million barrels of oil a day, about one-third of Russia’s current exports.

Russia last year took a USD25-billion loan from China in exchange for future oil deliveries, cementing its energy-trading relations with the world’s fastest growing oil consumer. The deal entitles China to import 300,000 barrels a day of Russian oil for 20 years starting in 2011.