Chechnya Oil Route to Take Nine Months

MOSCOW (Reuter)–Building the planned section of an oil pipeline bypassing Chechen territory will take about nine months–Russian Fuel and Energy Minister Boris Nemtsov said.

The 284-kilometer section would not be started until financing the project–estimated to cost $200-300 million–was fully worked out – a process which could take a further few months–he said in a weekend interview.

"The construction will take about nine months from start to finish," he told Reuters. "But construction can only start once the question of money is resolved. That question will also take a few months to resolve. Because we do not want to use budget funds–we will have to raise money," he added.

Nemtsov said a number of options were available for raising credit to build the section of the pipeline–which Moscow wants in order to bypass its separatist-minded republic of Chechnya.

These included issuing Eurobonds or convertible bonds.

If Moscow decided on the former option–Transneft was well-positioned to get a reasonable credit rating–he said.

"Have you heard about Transneft debts? Everyone pays the company–and in cash… A company controlling all pipeline exports cannot be bad,” Nemtsov said.

Transneft is Russia’s oil pipeline monopoly.

Nemtsov said the only difference remaining between Russia and Chechnya on transporting oil across the rebellious region’s territory was that of payment.

He said that payment next year would not be in the form of tariffs.

The two sides agreed on a lump sum to carry oil from the Caspian to the Black Sea across Chechnya this year–but the longer term agreement still looks uncertain.

"The only question for next year is the overall payment. There will not be tariffs–simply a payment…The size of this payment will be the subject of further discussions," he said.

Transneft has a contract with the Azeris to carry their oil to world markets as early as next month–and the company may have to use alternative methods to the pipeline to fulfill its obligations.

But it still wants the Chechen section of the line joining the Azeri capital of Baku to the Black Sea Russian oil export outlet of Novorossiisk repaired so that it can take at least some oil from a major new consortium in 1998.

The $8-billion Caspian oil consortium–the Azerbaijan International Operating Company–plans to start output from its Caspian deposits shortly.

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