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Transneft Comes Under Corruption Spotlight

Russian oil pipeline monopoly Transneft has been accused of misusing state funds for the construction of the Zapolyarye-Pur-Pe pipeline, the last link in a chain to connect oil fields in West and East Siberia and the Yamal Peninsula to Transneft's network. The company seems to be little troubled by the charges, although experts say it could be used in a campaign against the company.

Deputies of the State Duma, or lower house of the Russian parliament, who belong to the social-democratic Just Russia party have written a collective letter to Sergei Stepashin, the head of the parliamentary watchdog Audit Chamber, requesting a probe into whether Transneft is effectively and reasonably using state money to build the pipeline.

Just Russia deputies are concerned over the cost of equipment for the pipeline. They claim that in one tender the initial price set by Transneft was more than four times higher than the market rate and caused losses of 10 billion rubles ($319.4 million) to the state.

Sources at Transneft say the current campaign has been initiated by Valery Gartung, a Just Russia deputy, whose affiliated structures took part unsuccessfully in a Transneft tender.

A Transneft spokesman told Nefte Compass that the pipeline monopoly hasn't yet received any official requests to provide documents on the Zapolyarye-Pur-Pe line neither from the Duma nor from the Audit Chamber. Transneft says the deputies might be unaware of the costs of materials for the pipeline it is building in the extreme far northern conditions.

Olga Danilenko from VTB Capital agrees that the Zapolyarye-Pur-Pe pipeline is a "unique project" whose costs are difficult to calculate. Construction of the pipe should be completed in 2016. Total investments have been penciled in at 199.24 billion rubles, of which some 73.49 billion rubles are to be spent this year.

The pipeline monopoly also recently said the 500 km Zapolyarye-Pur-Pe pipeline could be extended to become a potential route to evacuate crude oil to be produced on the country’s Arctic shelf. Transneft says the plan is in its infancy and that it has not yet been asked to thoroughly look at the issue by any of the oil companies concerned. Oil should first be found in the region, experts say, although it is understood that the route could be used for the Kara Sea fields that state-controlled Rosneft earlier agreed to develop with US supermajor Exxon Mobil.

Transneft appears unconcerned at a possible probe by the Audit Chamber, which regularly monitors how state money is spent. The chamber was planning to probe into the business activities and expenses of state gas giant Gazprom and oil champion Rosneft in 2013 and 2014, respectively.

However, the consequences of such accusations are hard to predict. Claims by Duma deputy Sergei Karginov led to Bashneft-Polyus, a joint venture between regional Bashneft and top independent Lukoil, being deprived of the license for the prized Trebs and Titov oil fields in Timan-Pechora.

Experts say Transneft's foes could turn the situation to their advantage. "Transneft is one of the largest state monopolies and investors are closely looking at the company's performance," Alexei Grivach, deputy head of the National Energy Security Fund, said. He suggested that the current campaign could be linked to postponed plans to privatize Transneft or reflect efforts to influence shares of the blue chip in the market.

The latest attack comes at a time when Transneft's relations have seemingly soured with Rosneft President Igor Sechin and Dagestani billionaire Ziyavudin Magomedov, with whom Transneft co-owns the ports of Primorsk and Novorossyisk (NC Feb.21'13).

By Nadezhda Sladkova

www.energyintel.ru 


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Analytical series “The Fuel and Energy Complex of Russia”:

State regulation of the oil and gas sector in 2023, 2024 outlook
Gazprom in the period of expulsion from the European market. Possible evolution of the Russian gas market amid impediments to exports
New Logistics of Russian Oil Business
Russia’s New Energy Strategy: on Paper and in Fact
Outlook for Russian LNG Industry

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