Transneft to pull out of Rosneft Far East pipeline

MOSCOW (Reuters) - Russia's pipeline monopoly Transneft (MCX:TRNFP) has decided to withdraw from building a pipeline to Rosneft's (MCX:ROSN) Far East Komsomolsk refinery due to an expected freeze on transportation tariffs, a company executive said.

The two sides are at odds over the financing of the expansion of the Eastern Siberia-Pacific Ocean (ESPO) pipeline and a spur line to China as Rosneft plans to increase oil supplies to Beijing.

Russia will freeze tariffs on state-regulated services including gas, electricity and railways in 2014 in a move to tackle inflation which at the same time will force companies to cut investment plans.

Tariffs are the sole revenue source for Transneft and the company expects the freeze to slash its revenue by more than 30 billion roubles (574 million pounds) next year.

First Vice President Maxim Grishanin told reporters the oil transportation tariff is not expected to rise after October 1, 2013.

Rosneft and Transneft agreed to build a spur to Komsomolsk refinery last year to supply the plant from the ESPO pipeline directly.

The refinery, which has an annual capacity of 8 million tonnes, currently receives crude by rail only. Speaking to Reuters, Rosneft spokeswoman said that the company is looking at "different options" in logistics and different possibilities to realise the project.

(Reporting by Vladimir Soldatkin; writing by Katya Golubkova; editing by Jason Neely and David Evans)