* Putin to officially launch oil link to Pacific
* May cut oil supplies to Europe
* Analysts question ability to fill new pipeline
MOSCOW, Dec 24 (Reuters) - Russia has completed its largest
infrastructure project since the Soviet Union by expanding its
eastern oil pipeline to the Pacific Ocean as it seeks to carve
out a bigger share of the Asian market.
It took 6 years and more than $25 billion for oil pipeline
monopoly Transneft to build the East Siberia -
Pacific Ocean (ESPO) link to the port of Kozmino, which had
formally relied on a rail link.
By completing the 4,200 km (2,600 miles) line, Russia has
created a powerful leverage for oil flows switches from East to
West and visa versa, sending a warning signal to the European
Union, which is heavily dependant on energy supplies from its
former Cold War adversary.
Transneft has said Japan bought almost a third of ESPO
exports this year followed by China with 24 percent and the
United States with 22 percent.
President Vladimir Putin has urged oil and gas companies to
increase their share in lucrative Asian energy markets. He was
expected to formally open the pipeline in the early hours of
Tuesday.
"This gives us an opportunity to efficiently work on the
fastest-growing market in the world, on the Asia Pacific
market," Putin said last week.
The project has been in the Russian limelight since its
start, and opposition activist Alexei Navalny has accused
Transneft of a $4 billion embezzlement connected to the
construction of the pipeline.
Transneft denied the allegations.
Analysts say that Europe's fear of less Russian oil is
justified, although exporting companies will decide themselves
on eastern or western routes on the basis of profitability.
"Of course, there is a risk of oil flows cuts to Europe. And
ESPO blend sells with a premium to Dubai, it speaks in favour of
the Eastern route," Alexander Kornilov, a senior analyst with
Alfa bank, said, citing the Asian market benchmark grade.
A first-quarter loading schedule has showed that Russia
would cut Europe-bound oil supplies with the biggest fall, of 20
percent, expected in its Baltic port of Ust-Luga.
Russia launched the first stage of the ESPO link to
Skovorodino at the Chinese border in 2009, and in January 2011
started pipeline deliveries at 300,000 barrels per day to China.
CHALLENGE TO FILL IT
Russia is the world's largest oil producer, at around 10.5
million barrels of oil per day, trumping Saudi Arabia while the
kingdom holds back some output to prop up crude prices. But most
of Russia's 50,000-km oil pipeline network is concentrated in
West Siberia and runs toward Europe.
Moscow has been steadily diversifying its oil exports by
shifting away from the Druzhba pipeline, built in the 1960s to
supply the Soviet Union's Eastern European allies.
It built the Ust-Luga oil terminal this year on the Baltic
and has drastically reduced flows via Druzhba, forcing some East
European refineries to seek other options.
But with the ESPO pipeline in place analysts have questioned
Russian ability to stick to its commitment of keeping steady
supplies to both east and west.
In 2013, Russia will deliver some 18 million tonnes (360,000
bpd) via the ESPO-2 pipeline to Kozmino and ship up to 4 million
tonnes there by rail. Long-term, it looks to increase that to 1
million bpd.
"It would be quite a challenge for Russia to fill the
pipeline. And some of the East Siberian fields have not been
performing as expected," Julius Walker, energy markets
strategist with UBS in New York, said.
The Vankor oilfield, controlled by Russia's top crude
producer Rosneft, has been the main contributor of oil
to the pipeline. Vankor's production is expected to increase to
500,000 barrels per day next year.
Russia has also offered tax relief for some East Siberian
fields, including scrapping exports duty - the largest single
tax item for oil companies.
According to VTB Capital projections, East Siberia fields
will produce 45 million tonnes (900,000 barrels per day) by
2020, up from 15 million tonnes this year.