BELARUS NEWS AND ANALYSIS

DATE:

13/01/2010

Russian Oil Flow To Belarus Refinery Due To Stop Thursday

By Jacob Gronholt-Pedersen

MOSCOW -(Dow Jones)- Russian oil flows to Belarus' largest refinery could halt Thursday, if the two countries fail to settle a pricing dispute, Russian pipeline operator Transneft (TRNFP.RS) said Wednesday.

Russia began curbing supplies through the Druzhba pipeline to Belarus' domestic market after a pricing deal between the two countries expired Dec. 31. The situation has raised concerns about midwinter disruptions to oil flows through a pipeline system that supplies about 10% of the European Union's oil needs.

Deliveries to the Mozyr refinery, which has capacity to refine 95,000 barrels of crude oil a day, are due to stop Thursday unless new supply contracts are signed, a Transneft spokesman said. Mozyr, which is majority owned by Belarus' state energy firm Belneftekhim and Russia's Slavneft (SLAV.RS), exports 80% of its production to European countries.

"If the situation doesn't change, supplies will run out soon," he said. Transit through the former Soviet republic to refineries in Europe is going as normal, he added.

Deliveries to the 88,000 barrel-a-day Novopolotsk refinery--Belarus' second largest--will continue for about a week under current contracts, the spokesman said.

Moscow and Minsk have failed to agree on new pricing terms for 2010. Until now, Moscow has taxed the crude that the former Soviet republic refines domestically at about one-third the rate applied to other international customers.

In recent years Belarus has annually used about eight million tons of oil domestically, while another 13.5 million tons annually were refined and re-exported at a hefty profit.

But now Russia is demanding that Belarus pays full customs duties on the oil it doesn't consume domestically.

The new tax could deal a serious blow to the struggling and largely isolated economy of Belarus. The extra duty could cost Belarus an estimated $5 billion this year, more than 10% of its gross domestic product, some experts say.

"Contracts are coming to an end, but we have enough oil for the near future," an official from the Mozyr refinery said. New supply contracts depend on the outcome of official talks between Belarus and Russia, he added.

Officials failed Saturday to overcome their dispute, but both sides say they remain willing to keep talking.

Three years ago, Russia briefly cut oil exports to Europe through the Druzhba pipeline, as it quarreled with Belarus over prices. That, along with a January 2009 natural-gas cutoff to Europe caused by disputes with Ukraine, raised doubts in Europe about Russia's reliability as a top energy supplier.

The Druzhba pipeline carries about 37 million tons of crude annually through Belarus to refineries in Poland and eastern Germany, which depend on the pipeline for nearly all of their crude.

Source:

http://english.capital.gr/news.asp?id=887107


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