BELARUS NEWS AND ANALYSIS

DATE:

31/07/2006

Russia's Main Oil Link to Europe Leaks Near Belarus

July 31 (Bloomberg) -- Russia's Druzhba oil pipeline, the supplier of an eighth of Europe's imports, resumed shipments after a leak near the Belarus border had disrupted supplies and sent oil prices higher in London.

The leak near Bryansk, western Russia was repaired today and the Soviet-built Druzhba-1 pipeline restarted pumping at 12:07 p.m. Moscow time, Viktor Beltsov, a spokesman at the Emergency Ministry, said today by phone from Moscow. Lithuania's AB Mazeikiu Nafta cut output at its refinery after Russian supplies were cut. Crude rose as high as $74 a barrel.

``Any disruption is very sensitive given the general nervousness of the market,'' said Valery Nesterov, an oil and gas analyst at Troika Dialog, a Moscow-based investment bank.

Continuing tension in the Middle East has increased concern about strains on the export network of Russia, the world's second-biggest oil supplier. European leaders said this month that Russia, which is planning a new $11.5 billion oil link to China, may not be investing enough in output and pipelines to ensure reliable supplies to the West.

Crude for September delivery jumped as much as $1.09 on the New York Mercantile Exchange. The contract traded at $73.54 a barrel at 2:43 p.m. in London.

Refinery Cut Off

Mazeikiu, which runs the only refinery in the Baltic states, hasn't received supplies from Russia since July 29 because of leakages from Druzhba. The company couldn't say when supplies will reach Lithuania through Druzhba, which runs through the Belarus region of Polotsk on its way to the Baltic Sea coast.

``Pipeline repairs were concluded over the weekend and supplies of crude toward Novopolotsk have been renewed in small capacity,'' Mazeikiu said today in a statement.

Mazeikiu can process as much as 160,000 barrels a day of crude. The company's Butinge terminal is scheduled to load 130,000 barrels a day of crude for export in August, up from 106,000 a day.

Sergei Grigoryev, deputy chief executive officer for pipeline operator OAO Transneft, wasn't available to comment.

The Druzhba system splits into two branches in the Bryansk region, one of which heads through Ukraine and Belarus to Poland and Germany, with the other linked to Lithuania, according to maps of the network on Transneft's Web site.

Environmental Damage

Russia's Natural Resources Ministry said the leak in the Surazh area in the west of the Bryansk region has damaged a ``significant area'' of forest, citing ministry officials. The ministry earlier said the leak may have spilled crude over at least 10 square kilometers, the ministry said in an e-mailed statement.

The Emergency Ministry played down the incident.

A leak on July 29 spilled 2 tons of crude that spread over 340 square meters of territory, Beltsov from the Emergency Ministry said today.

``This is a local level accident, which wasn't even included in our report for federal-level accidents,'' Beltsov said.

To contact the reporter on this story:

Lucian Kim in Moscow at lkim3@bloomberg.net

Milda Seputyte in Vilnius at mseputyte@bloomberg.net

Source:

http://www.bloomberg.com/apps/news?pid=20601087&sid=arN37NF9geKo&refer=home