China's first private oil pipeline to import oil from Russia is expected to be completed and start operation next year, sources said.

A 30-kilometre -cross-river pipeline will link railway lines between Heihe, a port city in Northeast China's Heilongjiang Province, and Siberia's Blagoveshchensk in Russia.

The two cities are the nearest in terms of distance along the borders of the two countries, just separated by the Heilongjiang River or the Amur River in Russia.

"With the geological advantages, the pipeline we are building would be a speedy and convenient shortcut to transport oil from Russia," said Tao Ran, general manager of the Heihe-based Xinghe Industries Development Co Ltd, the pipeline's Chinese operator.

With an estimated total investment of 520 million yuan (US$ 64 million), Xinghe Industries will invest 342.33 million yuan (US$ 43 million), and the Moscow-based Russian Lanta Oil Company will undertake the remaining 170 million yuan (US$ 21 million).

Construction will include a railway unloading field and oil transfer station in Blagoveshchensk as the inlet for the oil, four pipelines crossing beneath the Heilongjiang River, and another railway loading field and oil transfer station in Heihe as the outlet for the oil.

The land reclamation for the railway facilities of the oil pipeline on the Chinese side was already completed, according to Tao.

The whole project is expected to be done in September next year, with an initial annual transporting capacity of 3 million tons of oil. It may reach its full capacity of 5 million tons by the year 2008.

Amidst the lingering Sino-Russian oil pipeline issues, the construction of this pipeline may be a good way to relieve the oil transportation bottlenecks between the two countries, experts say.

At present, China mainly relies on railways, linking the land port of Manzhouli in Northeast China and the port of Erenhot in Inner Mongolia, to import crude oil from Russia.

With this limitation, the transportation of oil has already affected the importation of other goods.

"The pipeline would definitely play a considerable role in relieving the saturation point in the two ports," Song Kui, director of the Northeast Asian Research Centre in Harbin, capital of Heilongjiang Province, told China Daily.

China now imports about less than 10 million tons of crude oil from Russia each year. The number will reach 15 million tons in 2006, according to an agreement signed between the two countries last October.

The four pipelines crossing through the river is encased in another big pipeline and will transport different oil products, which had been through the preliminary process on the Russian side, according to Song, who is closely involved with the pipeline project.

The Russian side has opened an office in Blagoveshchensk to deal with the construction and is responsible for searching for oil sources.

"Xinghe Industries does not have the right to import oil from Russia," he said. "It is just in charge of the operation of the pipeline."

An Zhaozhen, a researcher from the Russian Research Centre of Heilongjiang, welcomed the establishment of the pipeline as a "good move" for private companies in Heilongjiang to tap into the Russian markets.

"The oil products will be mainly provided to the users in Heilongjiang Province, so this pipeline is more of local significance," Song said.

Earlier this year, the province has called for more privately-owned companies as the main forces to exploit the Russian markets, according to An.

But Song Kui warned that Russia's new regulation on mines and resources may create more barriers for domestic companies to enter this field.

"The new regulation rules out the possibility for foreign companies, which does not have the identity of a Russian corporate body, to exploit Russian mineral resources," he said.

"That means Chinese companies will have to register another company in Russia in order to have the permission to exploit Russian mines."

He suggested lowering the threshold and giving more freedom to privately-owned companies to enter the energy fields.

Xinghe and Russian Lanta have established a joint venture in Russia.

(China Daily September 28, 2005)