Oil Transporting Joint Stock Company Transneft: Information from Answers.com

Type: Public Company
Address: Ul. Bolshaya Polyanka 57, Moscow, 119180, Russia
Telephone: (+7 495) 950 81 78
Fax: (+7 495) 950 89 00
Web: http://www.transneft.ru
Employees: 12,000
Sales: RUB 202.42 billion ($7.13 billion) (2006)
Stock Exchanges: Moscow
Ticker Symbol: TRNFP
Incorporated: 1993
NAIC: 486910 Pipeline Transportation of Refined Petroleum Products; 486110 Pipeline Transportation of Crude Oil
SIC: 4613 Refined Petroleum Pipelines; 4612 Crude Petroleum Pipelines

Oil Transporting Joint Stock Company Transneft is Russia's primary crude oil pipeline operator. The publicly traded company, controlled by the Russian government, operates the world's largest unified pipeline network. At the beginning of 2007, Transneft's network covered nearly 48,000 kilometers of pipeline, and transported nearly 460 million tons of oil. This figure represented 93 percent of Russia's total oil production capacity (the country is the world's second largest oil producer). As part of the pipeline network, the company also operated 386 refilling stations and 833 reservoirs, with a total capacity of 14 million cubic meters. Since much of the company's pipeline was constructed during the Soviet era, Transneft is also responsible for carrying out maintenance, upgrades, and replacement of the rapidly aging network.

The company also oversees the continued extension of its pipeline. The company expects to commission the first 2,700-kilometer leg of the new East Siberian oil pipeline in 2008. That pipeline, which will total 4,700 kilometers upon completion, will ultimately provide direct oil transmission from the Eastern Siberia oilfields to Japan, South Korea, and China. In 2007, also, Transneft became part of a trilateral agreement to construct and operate a 285-kilometer pipeline transporting Russian oil from Burgas, in Bulgaria, and Alexandroupolos, in Greece. That pipeline is expected to be completed in 2011. Transneft is listed on the Moscow Stock Exchange.

Baku Oilfields in the Mid-19th Century

The Baku oilfields, discovered in the early 1860s, became something of a Russian Wild West, as fortune seekers arrived to stake a claim to what was then one of the world's largest known oil deposits. By the end of the decade there were 120 wells in operation, more than 100 oil companies, and more than two dozen factories, including the first refineries. Many of these facilities were built within the town, and quite a number of them were even operated from residential sites. The fields also attracted a number of major companies of the time, especially the Nobel group.

From the start, transporting the crude oil from the Baku fields to the growing number of refineries, and then from the refineries elsewhere in Russia, had created a major obstacle. At the time, the development of pipelines remained in their infancy, with the first being developed in the United States. While suggestions were made to construct a pipeline connecting the Baku fields to their refineries as early as 1863, the proposal was rejected. Instead, oil was transported in wooden barrels, and later in wineskins. The cost of such transportation methods was high: if a "pood" (the old Russian measurement, equivalent to approximately 400 kilograms) cost three kopecks at the oil well, by the time it had arrived in Baku, it cost as much as 23 kopecks.

Before long transporting oil became even more difficult. Within a few years, the city of Baku had seen a proliferation of fires, while the presence of a more or less unregulated oil industry had seen the development of alarming levels of pollution. By the end of the 1860s, the city's authorities addressed these issues by shifting the focus of the oil industry outside of the city proper. For this, the city created a new industrial zone, called Cherny Gorod, or the Black City.

First Pipeline in 1879

The difficulties of transporting oil to Cherny Gorod remained a major impediment to the growth of the Russian oil industry. Yet calls to construct a pipeline continued to meet resistance, in part from groups, including the region's coopers and transport companies, that benefited from the difficult transport conditions. The impetus toward the construction of the country's first pipeline came from the Nobel company, which in 1877 contracted for the construction of a pipeline connecting its refinery in Cherny Gorod to its wells in the Baku fields. Construction of the pipeline, just 10 kilometers in length, was hampered by repeated acts of sabotage. By 1879, however, the pipeline had been completed and became the first in Russia to become operational.

The Nobel company soon expanded use of the pipeline beyond its own uses. The company agreed to transport the oil production of its rivals through the pipeline, charging five kopecks per pood for the services. As a result, the company quickly recovered the construction costs of the pipeline. That success inspired others to build their own pipelines, and by the end of 1879, a second pipeline was under construction.

The major figure behind the early technical development of Russia's pipelines was Vladimir Shukhov, an engineer working for the Bari company. Shukhov helped solve many of the technical problems of moving oil, and his work "Pipelines and Their Use in Oil Industry," published in 1881, helped set the standard for pipeline design during this period. Shukhov's theories helped launch the development of new oil hydraulics technologies, capable of transporting crude oil over longer distances.

By the mid-1880s, the Baku fields boasted a total of 96 kilometers of pipeline, and were transporting as much as 200,000 poods per day. At the beginning, oil was largely refined into kerosene, used for lighting lamps and heaters. The invention of the first internal combustion engines, however, set the stage for a new surge in demand for oil.

Hooking Up the Grozny Fields in 1895

The demand for oil was met by the discovery of the vast oil deposits in Grozny. At first, these fields too faced difficult transport conditions. Into the early 1890s, transport of the Grozny oil remained the province of horse-drawn carts. This spawned an entire industry, with more than 300 carts hauling as much as 15,000 poods of oil each day. The first pipeline in Grozny appeared only in 1895, built by the Bari company and based on five-inch pipes and stretched approximately 13 kilometers.

The construction of three large-scale refineries in Grozny in 1896 led to the construction of new pipelines. By 1898, the region boasted five pipelines, each operated by different oil companies, with a total throughput capacity of 190 million poods per year. The availability of this capacity stimulated the extraction of oil, and by 1900 the Grozny fields had boosted production past 25 million poods of oil.

Oil by then represented a significant export product for the Russian Empire. As early as 1882, talks had been held discussing the construction of a Transcaucasian pipeline in order to bring oil from the Baku fields to the Black Sea ports in Batumi. Yet, as these plans included proposals to construct a new series of refineries at the ports themselves, the Baku refinery companies helped to quash early plans for the pipeline, favoring the use of rail transport.

The rapid increases in oil output toward the end of the century soon outpaced the railroad's capacity. Proposals for the construction of the Transcaucasian pipeline were developed in the mid-1880s, yet met with continued resistance almost to the end of the 1890s. Construction at last began in 1896, but was only completed in 1906. The total length of the pipeline, which included 16 pumping stations, was 835 kilometers.

Nationalization in 1918

The Russian oil industry remained dominated by chaos and indecisiveness through the years of World War I. As a result, the country's pipeline construction lagged far behind its chief rival, the United States. Whereas the United States had successfully completed more than 14,000 kilometers of pipeline, including a well-developed system of trunk pipelines, Russia's own network barely reached 1,300 kilometers.

The outbreak of World War I placed further pressures on the Russian oil industry in general, as total production levels slipped strongly by the height of the conflict. Yet the oil industry's blackest period came during the Civil War, which saw the destruction of much of its pipeline capability and a deep slump in its oil extraction rates.

The nationalization of the country's oil industry came in 1918. The Bolsheviks, and later the Soviet government, recognized the strategic importance of the country's oil reserves and the need to ensure their transport. New pipelines were under construction during the Civil War, with calls to build a pipeline from oilfields in Emba to the city of Saratov. Another pipeline, linking the Baku-Batumi pipeline to Triflis, was launched in 1921.

Yet the early years of Soviet pipeline development were hampered by a lack of materials, especially pipe, and other construction equipment. Most of the country's pipeline plans remained stalled in their early development stages. The situation remained hampered by ongoing drops in budget allocations to the oil industry through the 1920s. As a result, no pipelines were completed in the Soviet Union between 1917 and 1927.

Filling Out the First Five-Year Plan

The launch of the first of the Soviet Union's many five-year plans provided a new boost to its pipeline construction. By 1928, the country had launched construction of a 618-kilometer span linking Grozny with Tuapse. A second Batu-Batumi pipeline, totaling 834 kilometers, was also constructed during this time. By 1931, the country had begun building a 455-kilometer pipeline connecting Armavir and Trudovaja.

By the end of the first five-year plan, the Soviet Union had put into place nearly 2,000 kilometers of trunk pipelines. Construction continued through the 1930s, and by the outbreak of World War II, the country had nearly doubled its total network. Further construction of the permanent network was deeply disrupted during the war, however, as the Nazi invasion destroyed much of the country's oil industry installations. Pipeline construction carried out during the period largely served to support the country's military effort. Of note was the construction of a 28-kilometer benzene pipeline, built on the bottom of Ladoga Lake, which was credited with helping the city of Leningrad (Saint Petersburg) survive the long Nazi blockade of the city.

Intensified Growth During the Cold War

Work on the country's pipeline system intensified during the Cold War. The Soviet domination of Eastern Europe gave the country new and captive export markets. At the same time, the intensification of the country's oil industry operations demanded further expansion of its pipeline capacity. Overseeing construction of the Soviet pipeline network was a new body, U.S.S.R. Ministry of Oil Industry Main Production Department for Oil Transportation and Supplies, or Glavtransneft. A number of pipeline projects were launched in the immediate postwar period, including a 183-kilometer link built to accommodate as much as three million tons per year.

Increases in the country's pipeline network were dramatic. By 1950, the Soviet Union counted more than 5,000 kilometers of pipeline; just five years later, that total had doubled. At the end of that decade, the country had launched construction of its first international pipeline, extending into Poland, Czechoslovakia, Hungary, and East Germany, for a total length of more than 6,000 kilometers.

The development of the vast oil reserves in the Siberian region brought the country's pipeline network there in the 1960s. Siberia became the site of much of the country's pipeline construction through the 1970s, with the launch of a number of large-scale projects. Among these was the Druzhba pipeline, which was extended to more than 10,000 kilometers by the time of its completion. During the 1980s, Glavtransneft's operations focused especially on filling out the Siberian region's trunk pipeline network. By the end of that decade, the Soviet Union's total pipeline network topped 94,000 kilometers.

Breakup and Reincorporation in the Nineties

The breakup of the Soviet Union had immediate consequences for Russia's pipeline operations, as much of the network installed by the Soviets rested beyond its borders. As a result, the country's pipeline network covered only 49,000 kilometers. Much of that network was rapidly aging and in desperate need of maintenance, and even replacement. Complicating matters was the highly heterogeneous nature of the network, a legacy of its more than 40 years of construction. As an example, the network included a wide variety of pipe diameters, ranging from 40 centimeters to as much as 122 centimeters.

The first step toward developing the pipeline system was taken in 1993, with the completion of the restructuring of the former Glavtransneft. A new company was formed, Oil Transporting Joint Stock Company Transneft, which in turn oversaw 11 companies formed to operate the country's trunk pipelines. Transneft remained fully controlled by the Russian government.

Transneft initially served the role as intermediary between Russia's oil companies and refiners. Following further reforms of the market, this position was taken away from Transneft. Instead, the company was forced to reorient itself from being a former bureaucracy to becoming a commercially viable corporation. Nonetheless, the company continued to enjoy its position as a natural monopoly.

New Pipelines for the New Century

Transneft carried out extensive maintenance of the network through the 1990s, helping to reduce the number of corrosion failures and leaks. The company also carried out a decommissioning of parts of the pipeline, reducing its total network to 45,000 kilometers by 1999. The pipeline system still retained the stigma of its Soviet-era construction, however. In 2006, for example, the reliability of its pipelines were once again called into question after a leak at the Druzhba pipeline spilled 50 tons of oil in one day.

The surging demand for oil, particularly from the developing world, in the meantime put new pressure on Transneft to expand the network. This became all the more important as Russia's oil and gas reserves began to form an increasingly central role in the rebuilding of the highly fragile Russian economy. In the late 1990s, Transneft launched construction of the Baltic Pipeline System, linking the western Siberian field to the Primorsk terminal on the Baltic Sea. The first phase of that project was completed in 2001; in 2003, Transneft launched an extension of that pipeline, more than tripling its capacity to 42 million tons per year.

Transneft launched two other high-profile projects into the middle of the first decade of the 2000s. The first was the construction of a new East Siberian pipeline. That project, expected to reach 4,700 kilometers upon completion, provided new transportation potential for Russian oil to the Asian markets, especially Japan, South Korea, and China. The first leg of that project was expected to be completed in 2008.

In 2007, Russia, Greece, and Bulgaria reached a trilateral agreement to construct and operate a pipeline transporting Russian oil from Burgas, in Bulgaria, to Alexandroúpolis, in Greece. Transneft became a major partner in the consortium for the 285-kilometer project, slated for completion by 2011. The new pipeline was expected to help relieve the bottleneck caused by the increasingly restrictive oil transportation policies in the Bosporus straits, controlled by Turkey.

By the end of 2007, Transneft's pipeline network once again neared 48,000 kilometers. The company was responsible for transporting more than 460 million tons of oil per year, generating revenues of RUB 202.42 billion ($7.13 billion). Transneft continued to enjoy its status as a government-held, pipeline monopoly. Many of Russia's privately held oil companies had begun lobbying to be allowed to build and operate their own pipelines. With its expanding network, Transneft appeared to be well-prepared to meet any future competition.

Principal Subsidiaries

Baltnefteprovod Ltd.; CJSC Transneft; JSC Center for Metrology Maintenance; Non-Governmental Pension Fund Transneft; OJSC Chernomortransneft (CHMT); OJSC Diascan Center for Technical Diagnosis; OJSC Druzhba MN; OJSC Privolzhsknefteprovod; OJSC Severny MN; OJSC Severo-Zapadny MN; OJSC Sibnefteprovod; OJSC Svyaztransneft; OJSC Transsibneft; OJSC Tsentrsibnefteprovod (CSN); OJSC Uralsibnefteprovod; OJSC Verkhnevolzhsknefteprovod; OJSC Volzhsky Podvodnik; OOO Transneft Finance; OOO Vostoknefteprovod; Transpress Ltd.; VSTO TSUP Ltd.; JSC Giprotruboprovod.

Principal Competitors

Saudi Arabian Oil Co.; PetroChina Company Ltd.; Brega Marketing Co.; SONATRACH; Qatar Petroleum; TransMontaigne Inc.; Alfa S.A. de C.V.; AB Mazeikiu Nafta; Roggio S.A.; Botas Boru Hatlari Ile Petrol Tasima A.S.; LINZ AG; KazTransOil; PETROMSERVICE S.A.; Technische Werke Ludwigshafen-am-Rhein AG.

	What is the significance of a joint-stock company? Read answer...
	Who founded the joint stock company? Read answer...
	The joint-stock company formed by the Puritans was the? Read answer...

	Who is the deputy chief of protocol including his telephone number and email address for the russian oil transport company transneft?
	Joint stock company in the philippines?
	What is the definition of 'joint stock company'?