Russian safety watchdog Rostekhnadzor said the Baltic oil terminal Ust-Luga, due to be launched later this year, has sustained heavy damage from landslides that could cause a serious accident.

Earlier this week Rostekhnadzor's head Nikolai Kutyin told Russia's Deputy Prime Minister Igor Sechin in a letter, seen by Reuters, that as of November 16 the port's quayside had been mauled by three big landslides of the shore into the sea.

He said Rostekhnadzor saw a danger of an accident while using this object with heavy economic and ecological consequences.

However Viktor Olersky, the deputy transport minister, told Reuters that Ust-Luga was still on track to be commissioned next month.

I believe we will launch it in December, he said.

A source close to the port said Sechin was due to chair a meeting to discuss the situation in Ust-Luga on Friday.

The oil trading community is closely watching developments surrounding the outlet, which is designed to handle oil from the newly built Baltic Pipeline System (BTS-2) pipeline - a project envisaged to bypass transit countries.

Delays to the launch of Ust-Luga have boosted bullish sentiment on the Russian Urals crude market this month and the grade from the world's largest oil producer is now enjoying its longest rally on record, also buoyed by fears of disruptions to Iranian supplies.

Last week, the head of Russia's oil pipeline monopoly Transneft told reporters that Ust-Luga will load its first crude oil cargo on December 15-20.

He said that the terminal was expected to ship 20 million tonnes of crude in 2012, while last month a company spokesman said the shipments could total as little as 10 million tonnes.

Trade and industry sources have already said possible infrastructure problems at Ust-Luga could delay its first crude loading, previously scheduled for November 30, for an undetermined period.

Russia, the world's No. 2 oil exporter after Saudi Arabia, wants to bypass the countries that stand between its abundant oil and gas reserves and customers in Europe after arguing with both Ukraine and Belarus over transit terms in recent years.

BTS-2 was first mooted after a transit dispute with Belarus in 2005-2006 and the link will tighten Kremlin control over energy supply routes, also giving it the option to divert flows from Ukraine.

(Reporting by Gleb Stolyarov; additional reporting by Dmitry Zhdannikov in London; writing by Vladimir Soldatkin; editing by Anthony Barker)