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Russia reduces Druzhba pipeline oil transit

Russia reduces oil transit via Druzhba / Reuters​

In July Russia will redistribute Urals supplies to the European Union. This is a forced measure. As part of the agreements with OPEC+, oil production is declining, and Russian suppliers are having difficulty fulfilling long-term contracts in other areas.

Today, Russian oil flows to the EU through two branches of the Druzhba pipeline. Instead of the 2 million 850 thousand tons planned for June, 2 million 500 thousand tons will be pumped to Poland and Germany along the northern branch. Transit along the southern branch will grow by approximately the same amount due to resumption of supplies to the Czech Republic. How will it affect Belarus?

Oil flows to the places where it's more expensive

Mikhail Krutikhin, a Russian economist and analyst of the oil and gas sector, a partner of Rusenergy, believes that in the situation of declining production Russian suppliers will sell oil where prices are higher:

"Last week, the price of Russian Urals was $2.40 higher than that of the Dated Brent. They receive a premium to their oil price somewhere in Europe. I do not rule out that this way they will try to supply less to the Belarusian refineries, where they will not get such a price. And more [will be supplied] in transit somewhere in Europe, where the price is higher. 

According to the agreement with OPEC+, Russia has reduced its production and will not increase it much in August. It may continue to do so. Of course, this should have an impact on Belarus. Since Russian companies need to sell the reduced volumes of oil at a profit, they will try to sell them where the price is higher".

And the transit?

In parallel with the reduction of supplies via the northern branch of Druzhba, Rosneft and Tatneft will increase their supplies via the southern branch. Russian suppliers are resuming exports to the Czech Republic. Shipments to this country are planned at 350 thousand tons per month.

Our country receives $5, or about 356 Russian rubles (excluding VAT), for the transit of 1 ton of oil along the northern route "Unecha - Adamova Zastava" towards Poland and Germany. Transit of 1 ton of oil along the shorter southern line "Unecha - Brody" towards Ukraine costs up to 156 Russian rubles (without VAT).

It turns out that Belarus would get about $1 million 780 thousand for 350 thousand tons along the northern route of the oil pipeline Druzhba, and that's without VAT. And Belarus would receive only about $780 thousand for the same amount of transit oil along the southern route. The difference would be about $1 million.


The Druzhba will not dry up

The Belneftekhim concern believes that restrictions on oil production under the OPEC + Pact will not affect Belarus:

"So far, there's nothing that would somehow affect oil supplies to Belarus. I don't think such volumes are significant for Russian companies," says Belneftekhim press secretary Alyaksandr Tsishchanka to Euroradio. "It seems to me that 350 thousand tons is not a sensitive figure. I would say that in this case it is a margin of error. They will deliver one and a half million tons to Belarus this month alone.