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Gas Pipeline to Be Completed on Schedule

The Kovykta project, which will transport natural gas from Russia's Eastern Siberia to China and South Korea, might come out ahead over the Sino-Russian oil pipeline project.

China and Russia are negotiating the price of the gas and the result of negotiations will likely be seen in three to four months, said TNK-BP President and Chief Executive Officer Robert Dudley.

He also said he is confident that natural gas from Kovykta will start flowing through the pipeline by the end of 2008 as planned.

TNK-BP is the major shareholder of Rusia Petroleum, the project's gas supplier. Other major partners in the deal include China National Petroleum Corp (CNPC), China's largest oil company, and South Korea's Kogas.

The president declined to reveal the price range offered by each party, but he told China Daily the price will be competitive as compared with alternative forms of energy, including imported liquefied natural gas.

The project aims to build a cross-border pipeline to carry 20 billion cubic meters of natural gas from the Kovykta field in Russia's Irkutsk Province to China's northeastern provinces, and then onto Beijing and the nearby Bohai Rim via domestic branches.

An additional 10 billion cubic meters of gas will be delivered to South Korea through an undersea pipeline in the port city of Dalian on the Bohai Rim.

CNPC, Kogas and Rusia Petroleum finished the international feasibility study (IFS) for the Kovykta gas pipeline in November, and signed a preliminary letter of intent for the sale and purchase of the gas.

The IFS has been submitted to the governments of Russia, China and South Korea for review and approval.

Dudley said Russian and Chinese Government officials are supportive of the project.

He also said the delay in final government approval for the project was due to recent elections and change of government in Russia.

"It is natural that things slow down somewhat" because of elections, Dudley said.

But he added that with the new government in place "it's a matter of time" before there is an announcement on the gas project and "more clarity on the oil pipeline as well."

And he insisted that the Kovykta project is separate from the oil pipeline project. The latter is stalled because Moscow cannot seem to decide whether to build the pipeline extending to China's Daqing or to the far eastern seaport of Nakhodka.

Dudley also warned that Chinese officials, during talks in Beijing, had said they are studying alternative energy supplies.

"The message was very loud and clear from the Chinese Government and company executives," Dudley told reporters.

(China Daily April 26, 2004)

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