Russia to profit from new oil line

Russia is the world's second largest oil exporter

MOSCOW, Russia -- Russian President Vladimir Putin is set to open a new oil terminal that will boost its exports to north Europe and help it save $1.5 billion in transit tariffs.

Russia has had to rely on facilities on other former Soviet bloc states, such as Estonia, Lithuania, and the Latvia, since the fall of communism in 1991.

Now the new terminal at the port Primorsk in the Gulf of Finland will give Russia, which is the second biggest oil producer in the world, more independence.

The $500 million terminus of the 455-kilometre (284-mile) Baltic Pipeline System, will help increase capacity to 240,000 barrels per day, or a 12 percent increase, to Russia's export capacity.

Up to 12 million metric tons (13.2 million tons) of oil to be pumped through it annually.

Putin said on Thursday that the new pipeline system will allow Russia to "guarantee its own security and independence."

A second stretch which is being built, costing $800 million, will add up to 18 million metric tons (19.8 tons) a year over the next decade and increase the total length of the pipeline to 2,700 kilometres (1,630-miles).

The completed pipeline will carry oil from the Timan Pechora region in Russia's Arctic North to Primorsk, about 160 kilometres (100 miles) north of St. Petersburg, as well as from Kazakhstan.

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The move comes at a time when Russia has said it will decrease the amount of oil it exports, in line with a request from OPEC, the Organization of Petroleum Exporting Countries.

Russia pumps 7.2 million barrels a day, but has said it will cut production by 150,000 barrels per day -- though there is always a seasonal reduction in winter, when drilling conditions in Siberian oil fields become tough.

Russia has not said how long the cut will remain in effect.

OPEC is holding an emergency meeting in Egypt in an effort to reduce supply and bump up the flagging price of crude oil.

The move had an immediate result with oil prices soaring after Saudi Arabia said OPEC would cut its output by 1.5 million barrels a day.

Oil prices have plunged by a third from a peak of $29.84 a barrel in February as a global economic slowdown dented demand.

Use of the Baltic Pipeline System should bring the Russian Government $100 million a year. It should also allow it to save up to $1.5 billion each year in transit tariffs.