Pipeline issue

Oil transshipment via Neva Pipeline Company’s terminal in Ust-Luga (BPS-2) is to decline this year while shipments from Ust-Luga Oil terminal are expected to increase. In this context, the conversion of the oil pipeline into the oil product pipeline is the subject of more speculations today.

Not for crude

This year, exports of Russian oil via the terminal of Neva Pipeline Company LLC (NPC, port Ust-Luga, Leningrad region, end point of Baltic Pipeline System-2) is forecasted to decline by 14%, year-on-year, to 20 mln t. However, the company guarantees that NPC will anyway “fulfill its contract obligations”. Even with the implementation of most pessimistic forecast and decline of transshipment volumes to 12 mln t the company will end the year with the “zero result” but will not be in the minus, NPC Director General Konstantin Khamlai told journalists. 

From March 23, 2012, till December 31, 2013, Rosneft (one of largest clients of NPC) exported 10,304,759 t of oil via the terminal. KazTransOil, another large client of NPC, exported 7,970,109 t of oil via NPC terminal.

Meanwhile, exports of Russian oil products via Ust-Luga Oil terminal (earlier known as Rosneftbunker terminal, port Ust-Luga, Leningrad region) are expected to surge by 27% against 2013 to 21.4 mln t. In 2014, dark oil products will make 55% of the total volume, light oil products – 18%, stable gas condensate – 27%.

“Transshipment will be boosted with the optimization of cargo handling process as well as with the improved internal logistics, - explained Konstantin Khamlai. – This will be directly reflected in the company’s financial results. According to the forecast, EBITDA will hit RUB 6 bln 664.3 mln in 2014 against RUB 5 bln 738.3 mln 2013».

As Dmitry Baranov, leading expert of Finam Management, commented for IAA PortNews, the latest political events and possible toughening of sanctions against Russia as well as earlier expressed EU opinions on gradual reduction of oil volumes purchased from Russia with eventual termination of purchases in the future make the prospects of oil exports via the Baltic ports of Russia less evident.

In our opinion, apart form the sanctions, the decline of oil exports can be also caused by the state policy stimulating domestic refining of crude oil and redirection of export traffic to the Far East (ESPO pipeline and supplies to China).

In this context, the possibility to convert one of two BPS lines into a product pipeline. Transneft has already had an experience in such a conversion. On BPS line ends in Primorsk, the other one – in Ust-Luga (NPC terminal).

In 2013, crude exports via Primorsk dropped by 20% to 54.52 mln t while exports of oil products surged by 43% to 9.3 mln t.

Over the same period, crude exports via Ust-Luga increased 1.63 times to 23.3 mln t, oil products – by 30% to 16.37 mln t.

The increase of oil exports via Ust-Luga should be partly attributed to redirection of oil from Primorsk.

Renamed and looking forward

From the beginning of 2014, Ust-Luga Oil, the largest and the youngest oil product terminal in Russia (former name – Rosneftbunker) has handled 5.8 mln t of Russian oil products including export of 3.853 mln t of dark oil products, 856,000 t of light oil products and 1.111 t of stable gas condensate.

The majority of oil products (46% of the total volume) is delivered to Ust-Luga Oil terminal from Kirishi refinery, 29% - from Yaroslavl and Ryazan refineries of Rosneft, 21% - from Gazprom Neft refineries. Major supplier of light oil products – Gazpromexport (32%). All stable gas condensate is delivered by NOVATEK OJSC.

The terminal’s design capacity is 30 mln t per year (20 mln t of dark oil products and 10 mln t of light oil products). The capacity of the tank farm is 1 mln cbm of liquid cargo. Four rail tank car racks can discharge over 500 rail tank cars simultaneously. 120 МW automated thermal oil heating plant has been built for product heating. It is the most powerful in Russia. Total lent hog three berths is about 1 km. The terminal is a strategic project of Gunvor Group contributing to the Group’s logistic opportunities.

As of today, three start-up complexes have been built and put into operation at the terminal. The launch of the forth one is scheduled for Q1’ 2015.  

The first start-up complex (annual capacity - 7 mln t) is dedicated for dark oil products. Its infrastructure includes tank car rack No 1 able to discharge 144 tank cars at a time and eight tanks with total capacity of 240,000 cbm for storing of different heavy fuel oils. Loading to tankers with deadweight of up to 166,000 t is carried out at berth No2. The first train with oil product arrived at the complex in early January 2011, first shipment took place in late January 2011 (to SCF Neva tanker).

The second start-up complex with the capacity of 7 mln t per year dedicated for dark oil products commenced operation in October 2011. Its infrastructure includes tank car rack No 2 able to discharge 144 tank cars at a time and nine tanks with total capacity of 190,000 cbm for storing of different heavy fuel oils. Loading to tankers with deadweight of up to 115,000 t is carried out at berth No1.

Annual capacity of the third start-up complex is 6 mln t of light oil products. Tank car rack No 3 can simultaneously discharge 144 tank cars. The capacity of eight tanks is 240,000 cbm of light oil products. Tankers with deadweight of up to 300,000 t are loaded at berth No 3. The first train delivered diesel fuel on April 18, 2013, first shipment took place on May 8, 2013. First shipment of stable gas condensate took place on August 27, 2013.

With the launch of the forth start-up complex, scheduled for Q1’ 2015, the terminal’s capacity will be built up to 30 mln t of oil products per year. The forth start-up complex is dedicated for both dark oil products (6 mln t per year) and light oil products (4 mln t per year). New rail tank car rack (No 4) for 94 tan cars will be built and put into operation in late 2014- early 2015. Besides, the start-up complex will have a tank farm for 90,000 cbm of light oil products and 200,000 cbm of dark oil products.

“We put high hopes on this rail tank car rack as able to boost oil product transshipment, especially in winter time,” Konstantin Khamlai said.

Ust-Luga Oil is set to focus on transshipment of oil products and is not going to provide bunkering services. “We have considered a possibility of bunkering operations at our terminal and we have come to a conclusion that this activity is not promising for us,” the company head explained. Besides, Konstantin Khamlai says “excessive obligations and risks can have certain influence on the production activities of the terminal”.

The company also plans to attract additional financing. “Most probably, it will be not Russia but foreign bank,” the company head says. According to him, a foreign bank provides better conditions. Additional resources are to be used for the return of shareholders’ loans and for operation activities. The company has not yet determined the loan amount though.

Meanwhile, Director General of Ust-Luga Oil announces the most ambitious plans of the company. “We want to become the most efficient terminal in Russia” he says. However, environmental safety is one of the major aspects in the “race for tonnes”.

According to him, one of the priorities of Ust-Luga Oil is the exclusion of any, even minimal, impact of the terminal on the environment in the Ust-Luga Bay. With this in mind, water treatment facility has been built at the terminal for multi-stage treatment of waste water with the application of clarifying and sorption filters as well as ultraviolet water purifier. 

Besides, permanent monitoring of air and water environment is being carried out at the terminal. Data from special sensors are processed by special automated system 24 hours a day. In case any incident, this system is ready to coordinate operation of all services at the terminal. 

To minimize the consequences of any possible oil spill, an oil spill response plan has been developed and approved at the terminal. Special equipment has been acquired. Besides, there is a berth for eco-fleet at the terminal, the only one in Ust-Luga. 

So, we can say that oil terminals in Ust-Luga, the construction of which is stipulated by their strategic position in the Baltic Sea, will further play one of the key roles of oil logistics in the region. In the future, we can face further decline of oil transshipment volumes in Ust-Luga with simultaneous increase of oil product handling.

Margarita Babkova
Vitaly Chernov