BELARUS NEWS AND ANALYSIS
DATE:
19/01/2010
Stakes high for Belarus in pipeline standoff with Russia
By OGJ editors
HOUSTON, Jan. 19 -- Stakes are high for Belarus in the country's latest showdown with Russia over oil pipeline export taxes and transit fees, the International Energy Agency said in its Jan. 15 Oil Market Report.
Reports of reduced flow of Russian crude oil to two refineries in Belarus helped boost oil prices early this month (OGJ Online, Jan. 5, 2010).
The disruption came after the countries failed to renew a 3-year agreement reached in 2007 that allowed Belarus last year to pay only 35.6% of the current crude export tariff of $267/tonne, according to Radio Free Europe/Radio Liberty (RFE).
Russia suspended deliveries at the end of 2009 but restarted them Jan. 13, RFE reported.
The suspension raised fears about oil supplies to Europe, where countries receive Russian oil through two legs of the 2 million-b/d Druzhba pipeline. The connection point of the two branches is at Mozyr, Belarus.
The dispute leading to the 2007 agreement interrupted about 1 million b/d of oil shipments via Belarus.
On Jan. 15, RFE reported that Transneft, the Druzhba operator, had ordered rerouting of about one third of the crude bound for the Belarus refineries at Mozyr and Naftan to the port at Gdansk, Poland.
In the latest dispute, according to IEA, Russia wanted to impose the full export fee on crude processed in Belarus and exported as product but to exempt oil consumed in Belarus. IEA said Belarus imports 420,000 b/d of Russian crude and consumes about 120,000 b/d domestically.
After 2009 ended with no agreement, Russia said it would charge the full export tax to all deliveries to Belarus, which responded by threatening to raise transit fees on Russian oil bound for Europe to $3.90-45/tonne from $0.89-2.90/tonne under the old agreement.
Druzhba shipments
IEA estimates that 1.5 million b/d of Russian crude entered Belarus via the Druzhba pipeline in 2009.
IEA members receiving crude from the Druzhba system and their 2009 averages are, from the northern leg, Poland 385,000 b/d and Germany 300,000-400,000 b/d; and, from the southern leg, Slovak Republic 115,000 b/d, Hungary 130,000 b/d, and Czech Republic 90,000 b/d.
IEA noted that Russia has been phasing out subsidies on hydrocarbon supplies to members of the former Soviet Union. Belarus, it said, appears to be one of the last major recipients of the favored treatment.
"It receives an implicit subsidy of some $2.5 billion/year from Russia, and oil product exports make up about 37% of total exports," IEA said.
Because of alternative shipment routes and strategic storage, it said, "there is no imminent threat of tighter European crude supplies." But, "given what is at stake for Belarus, a resolution may take some time to achieve."
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