How a ban on Russian crude affects EU's refining industry
Russia's crude oil exports to the European Union in January fell to around 600,000 barrels per day (bpd) from 1 million bpd in December as seaborne volumes dried up except to Bulgaria, International Energy Agency (IEA) data showed.
The EU imposed a ban on seaborne Russian crude oil imports from Dec. 5 and G7 countries set a price cap on Russian seaborne exports at $60 per barrel over Russia's invasion of Ukraine in February 2022.
Bulgaria has secured a two-year exemption from the ban.
RUSSIA REDIRECTS CRUDE EXPORTS TO ASIA
To offset the loss of EU trade, Russia has boosted crude exports to Asia. Its crude exports to China rose by 300,000 bpd in January to a record high of around 2.3 million bpd, the IEA said in a report published on Feb. 15.
Exports to India, which increased imports of Russian crude significantly last year, were broadly steady at 1.6 million bpd.
Ghana and Indonesia emerged as new destinations for Russian crude exports in January, the IEA added.
Exports to Turkey rebounded from a December low of 40,000 bpd to 180,000 bpd in January, but were still well below the average of 350,000 bpd previously.
HOW THE EU IS REPLACING RUSSIAN CRUDE IMPORTS
The EU has sought to offset the loss of Russian crude with increased buying from the Middle East, West Africa, Norway, Brazil and Guyana, the IEA said.
In December, Norway increased production capacity at its Johan Sverdrup oilfield to 720,000 bpd from 535,000 bpd, and its operator Equinor is looking at the possibility of boosting it to 755,000 bpd.
Sverdrup, Western Europe's largest oilfield, produces medium-heavy crude that is a suitable replacement for Russia's Urals.
Landlocked Hungary plans to cooperate with Croatia to increase the capacity of the Adriatic pipeline that brings non-Russian crude to Hungary, while Bulgaria is seeking to revive a pipeline project to import crude via Greece.
IMPACT ON EU REFINERIES
The EU's dependence on Russian crude oil imports had been underpinned by Russian companies, such as Rosneft and Lukoil, controlling some of the bloc's largest refineries.
Germany, however, has taken control of the Rosneft-owned Schwedt refinery, which supplies about 90% of Berlin's fuel needs, as well as Rosneft's minority stakes in two other refineries, MiRo and Bayernoil.
The government plans to change the laws to allow a quick sale of Rosneft's 54.17% stake in the Schwedt refinery without the need for prior nationalisation.
The refinery has been running at 60% capacity with oil coming through the German port of Rostock. The German government is looking at ways to supply additional volumes via the Polish port of Gdansk.
Lukoil has agreed to sell its ISAB refinery in Italy to a group led by Cypriot private equity firm G.O.I. Energy, backed by Geneva-based commodity trader Trafigura, but still owns refineries in Bulgaria and Romania.
Bulgaria's parliament has cleared the way for the government to take over Lukoil's Neftochim Burgas refinery, the largest in the country, to ensure security of supply, if needed.
SUPPLY VIA DRUZHBA PIPELINE
While the EU imposed a ban on seaborne imports of Russian oil on Dec. 5, it is still receiving piped supply.
The Druzhba pipeline has a branch through Belarus and Poland to Germany, and another through Ukraine to Slovakia, the Czech Republic and Hungary.
Druzhba volumes fell to 400,000 bpd in January as Germany voluntarily suspended imports at the end of 2022, the IEA said.
Russia halted supply to Poland via Druzhba, Polish refiner PKN Orlen said on Feb. 25, which pipeline operator Transneft blamed on incomplete paperwork.
Slovakia, which depends nearly 100% on crude oil imports via Druzhba pipeline, plans to cut its dependence to around 60% this year.
Germany planned to start importing crude oil from Kazakhstan via Druzhba's northern leg in February, but talks over the final details have delayed the start.
Kazakhstan has requested Druzhba operator Transneft provide about 24,000 bpd of transport capacity for 2023, and said on Feb. 23 it had started collecting oil for the shipment.
Comments