Austrian firm may open delayed pipeline

Bloomberg

The link will connect OMV’s main refinery in Schwechat, near Vienna, with the existing Druzhba pipeline from southeast Russia, according to Gerhard Roiss, OMV’s head of refining and marketing, who will take over the role of chief executive officer in 2011.

Transpetrol, Slovakia’s state-run pipeline company, will help to build the 50-kilometer (31-mile) link.

"You have thousands of kilometers of the Druzhba pipeline system and then there’s a piece missing that you can hardly see on a map," Roiss, 57, said in a May 26 interview at the company’s headquarters in Vienna. The pipeline will "be very important for the security of supply for both countries," as it will allow crude to be pumped in both directions, he said.

Since 2003, OMV has been trying to close the gap in its pipeline system to diversify supplies and gain better access to Russian crude. It currently relies on shipments through the Italian port of Trieste, resulting in high transportation costs that curb profit margins.

Druzhba, the world’s longest oil pipeline, was built to supply former communist countries with oil from Russia. It carries oil from eastern Russia to countries such as Slovakia and Ukraine, stopping at the border between Austria and Slovakia.

OMV had to abandon the pipeline project after Slovakia’s partner in the project, Russia’s Yukos, filed for bankruptcy in 2004 amid tax claims. Slovakia in March this year agreed to buy back the minority stake formerly held by Yukos, opening the way for a second attempt to complete the project.

"The decision lies with Slovakia," Roiss said, hopeful of a positive decision before the end of the year. Construction would take about a year so that "the first oil could flow in 2010/11," he said. Roiss didn’t say how much the pipeline would cost.

Russia is currently the fifth-biggest supplier of oil processed in OMV refineries after Libya, Kazakhstan, Romania and Iraq.