Russia Rebuilds Its Antiquated Pipeline Network

Article excerpt

Russia has raised the first $106.5m towards an urgent, multi-billion dollar investment programme to rebuild its obsolete oil as well as natural gas pipeline networks on which Western Europe depends for its energy supply security.

The initial loan granted by the World Bank will contribute towards the rehabilitation of the gas distribution network in the city of Volgograd and the purchase of energy-efficient equipment for consumers in ten other pilot cities. The loan has been announced following an explosion late in April of a gas pipeline and a major fire in the semi-autonomous remote Komi Republic where an earlier oil pipeline disaster had released some 100,000 tonnes crude oil into the sensitive Arctic environment.

Russia -- the home of one-third of the global natural gas reserves -- must make safe or rebuild its entire aging, shabbily built and poorly maintained pipeline system which is blamed for an intensifying series of emergencies.

The programme heralded by the present World Bank loan will necessitate tens of billions of dollars of fresh investment and create lucrative business opportunities for many industries including energy, construction, engineering and transport.

Walter J. Hickel, the Governor of Alaska, said after a recent visit to the Komi disaster area: `Make no mistake, this spill has catastrophic potential. The energy production and delivery system built in the Russian Arctic during the Soviet era is a world catastrophe waiting to happen. If Russian leaders are willing, the world community will help them in the monumental task of rebuilding and modernizing that system.'

A specialist spokesman for the United Nations' Geneva-based Economic Commission for Europe (ECE) comments: `Western technology is available and transferable to the former Soviet Union.' His organization has mounted a big technical assistance programme in support of the pipeline rehabilitation schemes.

`Improving the antiquated pipeline systems', the ECE elaborates, `will make additional gas available for domestic use and export, meeting mounting market demands for energy. It will also cut the import bill for products recovered from natural gas, such as sulphur, reduce the pace of environmental degradation caused by emissions of sulphur dioxide and nitrogen oxides and save greenhouse gas emissions.'

Hundreds of pipeline spills take place in Russia every year, adds Greenpeace, the environment protection organization, in Moscow, involving the annual loss of perhaps three million tons of oil.

Russia earns half its foreign exchange income by exporting gas and oil. Annual capital requirements to stabilize the existing production levels for oil and gas exceed $10bn. Transporting natural gas more efficiently would save Russia an estimated 80bn cubic meters a year -- equal to the country's annual exports to Western Europe.

In 1993, Russia's gas system alone required an annual expenditure on maintenance and replacement of around $12bn by Western standards, according to an authoritative analysis to be published by the Organization for Economic Co-operation and Development (OECD).

In the event, gas sales yielded only eight billion dollars for that purpose, which meant that a considerable amount of essential pipeline work has not been carried out. But substantial natural gas deposits have been discovered north of the gasfields of Western Siberia. Some of them are offshore, in the Barents and Kara Seas, and will be costly to develop.

The gas industry operates with planning horizons of 20 years and more, observes the study (`Energy Policies in Russia', International Energy Agency; OECD Publications, Paris, forthcoming later this year); and by that time, additional demand may well require new Russian energy sources as well as export infrastructure.

The construction of three new crude oil export facilities are already under active consideration, aimed at opening the promising Timan-Pechora field in the north east of European Russia. …