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2020 September 11
Belorussian oil products: who needs them?
Belarus authorities have returned to discussing the redirection of cargoes from the ports of the Baltic states to the ports of Russia. Oil products are currently in the focus. However, it can prove to be economically unprofitable for either Belarus or Russia.
Amid the political events in the country and the reaction to them from the Baltic states, the Government of Belarus have again brought up the topic that has been under discussion for many years: shifting Belorussian cargoes from the Baltic ports to Russia.
Oil products including heavy fuel oil, naphta and diesel fuel are in the focus. IAA PortNews estimates their total volume at 8-10 million tonnes per year. Potentially, they can be taken over by the port of Ust-Luga and Big Port St. Petersburg (Petersburg Oil Terminal).
Ust-Luga Oil terminal can take over both heavy fuel oil and light oil products, some of the latter can be handled by another Ust-Luga terminal, Portenergo. Petersburg Oil Terminal can partly take over heavy fuel oil.
Oil products can be delivered from Belarus by railways. However, when compared with the delivery to Klaipeda, transportation to the Leningrad Region means a considerable extension with seaborne transport to be involved. That has initially been the core problem. To make this logistics economically viable, Russian Railways will have to offer Belarus a great discount. We estimate it at 70-80% of the basic rate. As we know, a maximum of 50% was under consideration during the recent negotiations. In case of that sound discount, Russian railways will have to work for nearly a loss. Without it, Balarus will be on losing side.
As Mikhail Skigin, Chairman of Petersburg Oil Terminal BoD, told IAA PortNews, it is difficult to estimate the chances of redirecting oil product flows from Belarus’ refineries to Russia’s Baltic ports. “As for commercial issues and logistics, Russian ports have already had experience of handling Belorussian oil products and will be able to deal efficiently with those exports in full”, he says.
It should be noted in this respect that although additional cargo means additional income for the sea terminals, they are actually well loaded without Belorussian oil products. To ensure sufficient capacity for handling of Belorussian cargo, part of flows should be probably redirected from Ust-Luga to Primorsk.
According to IAA PortNews’ Analytical Department, handling of oil products in the ports of Russia’s Baltic Basin increased in H1’2020 by 13%, year-on-year, to about 37.6 million tonnes. Oil products flow via Big Port St. Petersburg grew by a quarter with the same growth shown by Primorsk. In Ust-Luga, handling of oil products grew by 6%, in Vysotsk – by 1%.
Thus, if a political decision is made it will lead to losses of either Belorussian or Russian side. No win-win solution is seen so far.
Vitaly Chernov
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