Russia to build pipelines to Japan, China

The Russian government has decided to build a key oil pipeline that stretches toward Japan, with a separate branch going to northeastern China, Interfax quoted Prime Minister Mikhail Kasyanov as saying March 14.

The decision marks a vital compromise as both China and Japan have for months vied for oil shipments from the massive deposits in eastern Siberia, which have so far been cut off from Asian markets.

Three options had been considered: a pipeline serving China, one serving Japan, or a compromise serving both.

Kasyanov said ministries and other government officials must decide by May 1 where exactly the new pipelines will be laid.

The news report added that changes may still be made to the project at a later date if it loses economic feasibility.

"There are many factors that must still be thought through," the news agency quoted Kasyanov as saying.

He added that none of the sides involved were yet absolutely certain as to the size of oil reserves in the untapped fields.

"There is still a high degree of uncertainty about the confirmed and unconfirmed reserves" in eastern Siberia, Kasyanov was quoted as saying.

The pipeline project given priority by the government would stretch from Angarsk - the easternmost point of the Russian oil pipeline complex on the western shores of Lake Baikal - to Nakhodka on the Pacific coast on the shores of the Sea of Japan.

This pipeline route has been heralded as a possible uncorking of the flow of Russian oil not only to eager consumers in Japan but also other northeastern Asian customers and possibly the United States at a later date.

Meanwhile the project to Daqing in northeastern China has been backed by competing Russian oil interests.

However, some top Moscow officials argue that the plan, while cheaper, may have a smaller return on investment in the long run because it has less opportunity for growth of exports.

Debate over the competing routes has come to the fore in recent months as global worries mount over the fate of world energy prices amid the Iraqi crisis.

The shorter line to Daqing, a 2,400-kilometer (1,400-mile) project would cost $2.9 billion to build, according to some government estimates.

Russia's second largest oil producer Yukos is involved heavily in the China project.

The longer 3,800-kilometer line running through the frozen Chita district toward Nakhodka would cost $5.8 billion and link Siberian oil to customers in Japan, South Korea and perhaps the United States.

The Japan option is backed by Transneft, the state agency which holds the monopoly on oil pipeline transportation.

Analysts had earlier suggested that the China route would have been constructed first, perhaps by 2005 - and Kasyanov's comments appear to have dashed those estimates.