BELARUS NEWS AND ANALYSIS

DATE:

08/01/2007

Ukraine to deliver more Russian crude, Belarus less

By: John Helmer

MOSCOW (Mineweb.com) --A new Russian crude oil export deal will increase pipeline shipments southwards through the Ukraine to tankers waiting at Odessa port, on the Black Sea. An additional 70,000 barrels of crude per day has been agreed, commencing this month.

The news comes as Russia's Transneft, the state-controlled pipeline agency, said Monday it has halted shipments of crude through the Druzhba ("Friendship") pipeline across Belarus to Germany and Poland. Germany receives an estimated 55,000 barrels per day from this source.

First reports of the Belarus shutoff came from the Polish Minister of the Economy and the Polish operator PERN. The Belarus oil company told Russian media -- most of them on the Orthodox Christmas and New Year vacation this week -- that ?the contents of the pipeline are confidential. Ask Transneft."

Transneft spokesman Sergei Grigoriev is reported by Reuters to have said that "the Belarussian side began taking transit oil as payment in kind for a new duty it had illegally imposed. We therefore reduced transit supplies, equal to the amount being taken. We then reached the point where we had to stop supplies completely.?

Before January 1, supplies of oil from Russia to Belarus were free from duties, under the customs union still tying the two neighbours together. Negotiations between Presidents Vladimir Putin and Alexander Lukashenko have so far failed to strike an agreement on preserving the special status Belarus has had in trade with Russia.

Starting on January 1, Moscow imposed a duty of $180.70 per tonne of oil crossing the border. On January 3, Belarus countered with a fee of $45 per ton on the transportation of Russian oil across Belarussian territory. The Belarussian Customs Committee then directly challenged Transneft for non-payment of the transit fees.

Transneft chief executive Semyon Vainshtok has been quoted by Russian news agencies as saying that the pipeline operator was doing all it could to reroute supplies to European customers.

Transneft has told Mineweb that pipeline deliveries to the Russian Black Sea ports of Novorossiysk and Tuapse are already at peak capacity, and cannot be enlarged. However, the pipeline originally built three years ago by the Ukrainians to transport Kazakh oil northwards to Poland has been operating in the reverse direction, carrying Russian crude.

At the end of last month, the Ukrainian pipeline agency Ukrtransnafta (?kraine Oil Transportation") agreed to a plan of lower shipment, transit and port charges in exchange for 70-percent more Russian crude to be pumped southward to the Yuzhny terminal, near Odessa.

The agreement for 2007 and 2008 was announced by Ukrtransnafta, and reached with Transneft, and Russian crude oil producer, TNK-BP. The volume of crude for this year is to be not less than 9 million tonnes (173,000 barrels per day). Russian crude shipments to Odessa in 2006 were just over 110,000 barrels per day, up 8% on the 2005 level. Both Urktransnafta and Transneft have agreed to lower tariffs on their legs of the pipeline network, starting this month.

The agreement puts a stop for the time being to the threat from some government officials in Kiev, who have said they would like to end the pipeline's dependence on Russian crude; redirect the pipeline flow towards the north; and negotiate incoming oil cargoes from the Caspian from US producers like Chevron.

Chevron is already on the defensive in its attempt to increase shipments of its Tenghiz crude from Kazakhstan through the Caspian Pipeline Consortium pipeline to Novorossiysk, and from there southwards through the Bosphorus. For the moment, Chevron also appears to be in no position to ship additional volumes of crude from Novorossiysk westwards by shuttle tanker to Odessa. Last June, Ukrainian oil industry officials tried to use the threat of reversing the Odessa-Brody pipeline northward to induce TNK-BP to raise its shipment volume towards the target that has now been agreed.

So far, official US government comments on the Belarus pipeline situation has been critical of just one side, the Lukashenko government, which the Bush Administration accuses of profiteering from the difference between the duty-free price of Russian crude, and the market price, by refining the Russian crude and reselling it to Poland.

A year ago, when Russia cut off natural gas supplies to Ukraine, after ending a subsidy price arrangement and the Ukrainian government refused to accept the higher price, the US attacked Russia for using its energy trade as a political weapon.

Source:

http://www.mineweb.net/energy/563127.htm