During 2007, Russia exported almost 4.4 million bbl/d of crude oil, and over 2 million bbl/d of oil products. Roughly 1.3 million bbl/d were exported via the Druzhba pipeline to Belarus, Ukraine, Germany, Poland, and other destinations in Central and Eastern Europe (including Hungary, Slovakia, and the Czech Republic), around 1.3 million bbl/d via the new flagship Primorsk port near St. Petersburg, and around 900,000 bbl/d via the Black Sea.

The majority of Russia’s oil exports transit via Transneft-controlled pipelines, but around 300,000 bbl/d of oil is transported via other non-Transneft-controlled sea routes or via rail. Because of higher world oil prices recently, almost 170,000 bbl/d of Russia's oil is transported via railroad (see table below).

Most of Russia's product exports consist of fuel oil and diesel fuel, which are used for heating in European countries and, on a small scale, in the United States. Russian oil exports to the U.S. have almost doubled since 2004, rising to over 400,000 bbl/d of crude oil and products in 2007. Updated monthly and annual data are available from EIA’s Petroleum Navigator. Increases in product exports can be attributed to political pressures to maintain refinery operations and higher international oil product prices. A draft plan for the refining sector’s development for 2005-2008 foresees continued increases in the production of high quality light oil products, catalysts and raw material for the petrochemical industry. As production of fuel oil is reduced, local refineries are only meeting about half of the country’s demand for high octane gasoline. Consequently, Russia must import the remainder.

In the last ten years OECD Europe’s reliance on Russian crude exports has grown from around 12 percent of total crude imports to around 29 percent in 2007.

Proposed Oil Pipeline Routes and Pipeline Expansion Projects

The BPS came online in December 2001 carrying crude oil from Russia's West Siberian and Timan-Pechora oil provinces westward to the newly completed port of Primorsk in the Russian Gulf of Finland (see Maps section). The BPS gives Russia a direct outlet to northern European markets, allowing the country to reduce its dependence on transit routes through Estonia, Latvia, and Lithuania. Unfortunately for the Baltic countries, the growth of the BPS has come at considerable cost, as Russian crude which traditionally moved through the Baltic region has been re-routed through the BPS.

Throughput capacity at Primorsk has steadily increased, reaching around 1.5 million bbl/d during 2007 on average. With the usage of larger-sized Baltimax tankers, throughput from the port should continue to increase this year. Although the port’s actual export capacity is allegedly twice as large (around 3 million bbl/d), pipeline capacity to the port keeps exports constrained. The Baltic Pipeline System-II (BPS-II) expansion will add new export outlets to the region, and in May 2008 the Russian government decided that a new line will run to the port of Ust-Luga with a branch going to the Kirishi oil refinery, The first stage of the Baltic Pipeline System (BPS, designed to transport oil from both Russia's oil-producing regions and Kazakhstan, was commissioned in 2001. Transneft has estimated the cost of the second stage to Ust-Luga at around $3.3 billion.

Russian product line operator Transnefteproduct expects began shipments of oil products from Primorsk in May 2008. Exports of around 180,000 bbl/d of products (8.4 million tons/year) were originally expected to begin during the third quarter of 2007.

Related information on energy in the Baltic Sea Region is discussed in the Baltic Sea Region Country Analysis Brief.

International shipping from the Murmansk area has two advantages: the port is ice-free most of the year, and it is deep enough to make shipping to the United States economic without reloading in Europe. Several pipeline proposals connecting the Murmansk area to existing producing areas in the south in the last several years have been met with lukewarm reactions by Transneft (see Maps section) The state-owned company now plans a pipeline to Indiga, 240 miles from the Timan-Pechora producing basin, that is closer but iced over in winter. No timeline has been set for construction. Oil from Timan-Pechora has a lower sulfur content and is lighter than the rest of the Urals blend.

Now, Russian oil is delivered to the Murmansk area by rail, and in 2007 around 270,000 bbl/d of crude oil and products were shipped from the area. Lukoil will complete its $1 billion, 240,000-bbl/d terminal at Varandei in June 2008, which will allow shipments from the northern part of Timan-Pechora. Lukoil’s major source of oil for this terminal will be the Yuzhno-Khylchuyu field where production is expected to begin during the summer of 2008 and rise to 150,000 bbl/d by the end of 2009.

Of the 1.3 million bbl/d of oil transported via the Druzhba Pipeline, only around 350,000 bbl/d flows to the south to Hungary, the Czech Republic and Slovakia. Reversal of the Adria pipeline, which spans between Croatia's port of Omisalj on the Adriatic Sea and Hungary (see map), has been under consideration since the 1990s. The pipeline, which was completed in 1974, was originally designed to load Middle Eastern oil at Omisalj, then pipe it northward to Yugoslavia and on to Hungary. However, given both the Adria pipeline's existing interconnection with the Russian system, and Russia's booming production, the pipeline's operators and transit states have since considered reversing the pipeline's flow, thus giving Russia a new export outlet on the Adriatic Sea. The proposal included expanding the pipeline’s capacity from 100,000 bbl/d to 300,000 bbl/d at a cost of around $320 million.

In 2005, Croatia determined that an environmental impact study of such a reversal was incomplete and not based on enough expert knowledge, thereby killing the proposal. During the Belarus-Russia oil dispute in 2007, Hungary said that it could technically reverse its portion of the pipeline within 20-30 days.

Until 2004, Russian energy officials were unwilling to commit to one of two oil transit pipelines to eastern Asia. President Putin announced that Russia would commit to building a 2,500-mile pipeline route from the Russian city of Taishet to Kozmino Bay, southeast of Nakhodka in two stages. The endpoint for the pipeline was moved from Perevoznaya Bay to protect endangered species there.

The 1,200-mile first stage of the 600,000 bbl/d-pipeline will flow from Taishet to Skovorodino along with a port facility at Kozmino Bay. Although Transneft expects first commissioning of the pipeline by December 2009, as of December 2007 roughly 28% of the first stage of the pipeline route has not been welded and buried. Oil will be shipped via rail to the Pacific coast until the second stage of the pipeline is constructed. China has agreed to finance the 43-mile, 300,000-bbl/d spur from Skovorodino to the Chinese border. Transneft now estimates that the first stage of the project will cost around $12.5 billion, up from an original estimate of around $6 billion. In April 2008, around 1.5 million barrels filled the first stage of the pipeline, which will first operate in reverse mode to bring oil production from East Siberia to refining centers in West Siberia. The second stage of the pipeline will run from Skovorodino to the Pacific Coast, with planned designed capacity of 1.6 million bbl/d.

(Source: US Government, click to enlarge)

The route to Kozmino Bay is significantly more expensive than an alternative route to Daqing, China, since it covers a greater distance and involves more investment. However, the new route will open up a new Pacific port from which Russian oil exports could be shipped by tanker to other Asian markets and possibly even to North America.

The initial stage of the ESPO pipeline will get significant volumes of sweet crude from the TNK-BP-led East Siberian Verkhnechonsk field, in which Rosneft is a partner, and from Surgutneftegas' Talakan field. Also, significant volumes (up to 270,000 bbl/d by 2010 according to Degolyer & McNaughton) would come from Rosneft’s Vankor field. Production from the three fields alone should be able to fill the pipe by around 2011.

Some hurdles exist to the Eastern Pipeline’s plan. First, financing the project is challenging. Russia has obtained Japanese promises of $7 billion for the project, but the first stage will be financed with a $2.4 billion revolving credit from state-owned Sberbank. The route passes through multiple environmentally sensitive areas which could have the potential to further delay the project. Finally, the government estimates that transportation tariffs could be roughly $6 per barrel, but other outside analysts estimate the level at up to $10 per barrel, which would help pay for increasing capital costs.

After Russian oil flows through the various pipelines described above, crude oil and products are shipped onward to Europe, the United States, and Asia via tanker. The bulk of Russia's oil (roughly 1 million bbl/d of crude) is shipped to the Mediterranean and to Asia via tankers in the Black Sea, mostly from the port of Novorossiysk. With the opening of the BTC pipeline in early 2006 and rising oil production exports from Caspian countries, Black Sea port shipments through the Bosporus will likely remain at around the same levels for the next couple years. The new Russian support for the Bourgas Alexandropoulis pipeline route, combined with existing support, makes this option one of the more commercially-feasible routes to help alleviate flows via the Bosporus.

Rail exports comprise roughly 5% of Russian crude oil exports. But unless significant investment flows into expanding the Russian pipeline network's capacity, non-pipeline transported exports are poised to increase even more in the upcoming years. As China's growth continues, rail routes are the only way to provide Russian crude oil to East Asia. In the absence of a dedicated pipeline route, Russian crude oil is exported via rail to the northeast cities of Harbin and Daqing and to central China via Mongolia. Rail exports of crude oil to China increased from approximately 200,000 bbl/d in 2005 to 300,000 bbl/d by 2006 according to China’s Ministry of Railways.

A map that shows most of these pipeline projects is available in the Maps section.