Report: Tokyo Offers $7Bln for Oil Pipeline

MT, Reuters) | dnesday, Oct. 15, 2003

[RussianConservative]

Upping the ante in its race with China to secure Russian energy supplies, Tokyo has offered Moscow a $7 billion financial package to build an oil pipeline to the Pacific instead of a rival project to northeast China, the Financial Times reported Tuesday.

Quoting an unidentified Japanese energy official, the FT said Tokyo is offering $5 billion to support construction of the 3,800-kilometer pipeline from eastern Siberia to the Pacific port of Nakhodka and another $2 billion to help develop Siberian oil fields and provide low-interest loans.

A Japanese Foreign Ministry official in charge of Russian affairs, however, denied that Tokyo had offered Moscow specific amounts of money.

"We have not made any proposals with such specific figures," the official said.

Energy-hungry Japan and China have been raising the stakes behind the scenes for proprietary access to Russia's growing crude supplies, with China backing a project proposed by Yukos to build a $2.5 billion, 2,400-kilometer route to Daqing.

Eager to diversify its oil sources, import-dependent Japan is eager for the Nakhodka pipeline to be built, which would also fit into a broader effort by Japan and Russia, whose relations have been complicated by a long-running territorial dispute, to tighten economic ties.

Energy Minister Igor Yusufov last week said Japan was ready to finance most of the construction costs and had agreed not to seek guarantees from the Russian government.

"It's true that Japan and Russia have been discussing ways to cooperate with each other [in the pipeline project]. But there's nothing more than that," the Japanese foreign ministry official said, Reuters reported out of Tokyo.

"We aren't setting a deadline because that's for Russia to decide."

Russia said last month that it would decide on which route it will choose by August, meaning oil supplies will likely not flow until 2007 at the earliest.

Both Japan and China, whose appetites for energy have grown because of their booming export-driven economies, are each eager to begin construction of its own project first, especially in view of doubts over whether two pipelines would be viable.

The Chinese pipeline, which would stretch from Angarsk near Lake Baikal in eastern Siberia to Daqing in China, has also been hampered by environmental worries and President Vladimir Putin's stated preference for the Japanese pipeline plan.