Power Struggles in Russia's Oil Rush to China
Ever since the Ukraine conflict, Russia has been routing its largest oil and gas volumes towards China. However, the power grid in Siberia and the Far East is buckling under the strain - and it's only getting worse.
China's arms wide open
With many Western allies turning a cold shoulder, China has eagerly swept in to buy Russian oil and gas at bargain-basement prices. Moscow appears happy to oblige, poised to boost its oil supplies to support China's economic growth. In March, Russian President Vladimir Putin himself welcomed his Chinese counterpart, Xi Jinping, with this sentiment, dubbing Russia the "discount gas station" of the East.
But the Russian pipelines' mighty sneeze
But it's not as straightforward as Putin makes it seem. Whispers of Gazprom's final days as a global gas supplier grow louder, as no new pipeline for China deliveries has been approved. And on top of that, the existing infrastructure in the Far East is quickly reaching its limit. According to independent Russian exile outlet The Bell, these limitations have led to numerous power outages at pumping stations.
43 stations, 25 power cuts - enough to give anyone the chills
Oil for China is delivered via the East Siberia-Pacific pipeline. The pipeline weaves an impressive 2700 kilometers from Taishet in the heart of Siberia to Skovorodino near the Chinese border. The pipeline summons giants and overcomes mountains along the way. However, its weakness lies in its 43 pumping stations, which ensure an oil-producing surge at intervals of 70 to 150 kilometers. These stations control the oil's flow, but power outages force pipe operators to cycle them off and on – a cycle that's growing repetitive.
The power outages indicate more than just a poor power grid. In recent months, Russia has been ramping up deliveries to China, attempting to compensate for lost business in Europe. And with these increased deliveries, power outages have surged as well – rising from 17 in 2020 to 2022 to a record 25 in 2023's first nine months. The Bell reports that Transneft, the state pipeline operator, is blaming the power outages on Russian Railways, which has also increased freight traffic to China since the start of the war.
Batteries not included
Nine months of 25 power outages might not sound catastrophic, but for a resilient rail network and pipeline, it's a major headache. Transneft complained of partial delays, with 17,000 tons of oil not arriving in China on schedule this year, equal to 2,319 barrels – a drop in the ocean compared to the pipeline's daily flow.
However, Russia has only just begun its Eastward swing, as Russian Railways plans to expand its freight capacity in the region to accommodate increased traffic. And that's not an option either. "The rail network is overloaded," warned transportation experts, reporting never-ending traffic jams and delays on the way to China.
Four billion euros and counting
To cope with this energy drain, Russia's state-owned utility Rosseti plans to inject four billion euros into the Siberian and Eastern power grid in 2023 and 2024. The Eastward shift is proving to be a pricey endeavor.
Enrichment Insights
- Railway Upgrades: Russia is upgrading its railway systems, including the Baikal Amur Mainline (BAM) and the Trans-Siberian Railway, to facilitate exports to China. However, these upgrades have reduced rail capacity, temporarily limiting freight traffic.
- Sanctions Impact: Western sanctions have affected Russia's coal sector, resulting in bankruptcies, declining domestic and external demand, labor shortages, and high railway tariffs, further hampering freight services.
- Locomotive Shortages: Sanctions have also led to a shortage of locomotives, with factories like TMH failing to meet production demands, exacerbating the inefficiencies in freight services.
- Pipeline Maintenance: The East Siberia-Pacific Ocean (ESPO) pipeline, which is vital for oil transport to China, may face maintenance challenges or power outages but lacks specific details on the steps taken to manage these issues.
- Alternative Transportation Methods: Russia, instead of relying solely on pipelines, is utilizing old uninsured ships to transport oil, helping to mitigate the impact of Western sanctions on oil exports.
Sources: , , [1, 2, 3, 4, 5]
