BELARUS NEWS AND ANALYSIS

DATE:

15/01/2010

Europe Oil Supply Insulated From Russia, Belarus Spat, IEA Says

By Stephen Bierman

Jan. 15 (Bloomberg) -- Germany, Poland and three other European countries that receive Russian oil supplies via the Druzhba pipeline across Belarus can weather a potential disruption, the International Energy Agency said.

"Although there is no imminent threat of tighter European crude supplies, given what is as stake for Belarus, a resolution may take some time to achieve," the IEA said in a report today.

The five European countries, which include Hungary, the Czech Republic, and Slovakia, have more than three months of emergency stocks and alternative supply routes, the IEA said.

Russia and Belarus have failed to reach an oil supply deal after a tax agreement from 2007 expired at the end of last year. A dispute over customs and transit fees that year between the two countries led to supply disruptions for about three days.

OAO Transneft, Russia's state run pipeline operator, warned that oil flows to Belarus's Mozyr refinery may stop next week as suppliers haven't confirmed shipments. Both Belarus and Russia say the dispute won't affect deliveries to Europe.

Poland received 385,000 barrels a day, or 93 percent of its oil imports last year, through Druzhba's northern branch, while Germany got from 300,000 to 400,000 barrels a day, or as much as 20 percent of its imports, via the link, the IEA said.

Poland and Germany can take supplies through their Baltic Sea ports in the event of pipeline disruption, the IEA said.

Alternative Oil Routes

The southern leg of Druzhba, which runs from Belarus through Ukraine, shipped 115,000 barrels a day to Slovakia and 130,000 barrels a day to Hungary, all of the two countries' oil imports last year, the IEA said. The link supplied the Czech Republic with 90,000 barrels of oil a day, or 60 percent of its imports last year.

Hungary and Slovakia have an alternative import route through Croatia from the Adriatic Sea while the Czech Republic can get oil supplies from Trieste, Italy, the IEA report said.

Belarus received an implicit subsidy of about $2.5 billion per year under the expired accord with Russia, the IEA said. Russia, which views Belarus as a strategic ally and key transit state, allowed its neighbor to benefit from lower oil prices by discounting the export duty for supplies to its refineries.

Russia, which plans to reinstate full taxation on most crude shipped to Belarusian refineries, may recoup as much as $2 billion for its budget at current oil prices, Igor Kurinnyy, an oil analyst at ING Groep NV, said by e-mail yesterday.

Source:

http://www.bloomberg.com/apps/news?pid=20601100&sid=a5IcAwRsRQxw


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