Oil transportation flies forward - Newspaper Kommersant No. 183 (7384) dated 10/04/2022

Oil transportation flies forward - Newspaper Kommersant No. 183 (7384) dated 10/04/2022



Russian oil companies, against the backdrop of approaching EU sanctions, are preparing to return to transporting oil east by rail for the first time since 2016. Transneft, according to Argus, at the end of September shipped a trial batch from the resources of Gazprom Neft in the direction of the port of Kozmino. This route has not been used since the launch of the ESPO-2 oil pipeline, but now this pipe is already fully loaded. And the release of additional oil cargoes to the Vostochny polygon will complicate the situation on the railways of coal miners, who this year were forced to concede scarce carrying capacity to more marginal cargo from the European part of the Russian Federation.

Structure of Transneft On September 25, Transnefteprodukt sent by rail to the port of Kozmino a test batch of oil owned by Gazprom Neft, in the amount of 4.4 thousand tons. According to Argus, citing railway forwarders, the raw materials left the Zuy station in the Irkutsk region. Kommersant's sources familiar with the situation explain that such a supply scheme was agreed with Transneft and oil was supplied from its pipeline system. The shipment reached the sea terminal on October 3, they note. Transneft and Gazprom Neft do not comment on the situation.

Railway routes running through the Irkutsk stations Zui and Meget, as well as from Skovorodino towards China or the port of Kozmino, were actively used by oil companies until 2015, when the second stage of the Eastern Siberia-Pacific Ocean (ESPO-2) oil pipeline was launched, extending the pipe from Skovorodino to the Kozmino loading terminal in Nakhodka, thereby connecting the fields of Eastern Siberia with the markets of the Asia-Pacific region. The design capacity of ESPO-1 from the city of Taishet in the Irkutsk region is 80 million tons per year, of which 30 million tons goes through a pipeline to China via a branch from Skovorodino, another 11 million tons per year is supplied to the Komsomolsk and Khabarovsk refineries, and the rest oil goes through ESPO-2 for export through Kozmino (up to 40 million tons per year).

Transporting oil through a pipe is much cheaper than by rail, so since 2016, interest in transporting oil in tanks to the east has faded. For example, in 2016 Rosneft needed to supply an additional 5 million tons of oil to China, and shipment of raw materials from the Meget station by rail through Mongolia was considered as one of the options. But such a route was found to be too expensive. As a result, the railway stations on the ESPO route, through which up to 15 million tons of oil per year used to go, became unused and were partially mothballed.

But over the past two months, according to Kommersant's sources on the market, given the EU's intention to stop the purchase of Russian oil from December 5, part of the capacity has returned to work, in particular, the Freight station serving the port of Kozmino. This, they explain, is due to the lack of pipeline capacity. Transneft President Nikolai Tokarev noted in September that, given the growth in supplies to Asia, the ESPO system is operating at maximum capacity. In August, the export of pipeline oil from the port of Kozmino reached a record 887 thousand barrels per day (3.71 million tons). In the summer, the company increased the capacity of ESPO-2 Kozmino with the help of special anti-turbulent additives. According to the estimates of the Russian government, this will allow pumping an additional 7 million tons per year, but Kommersant's sources call such estimates overly optimistic.

EU sanctions will significantly increase the cost of tanker charter and cargo insurance for Russian oil companies. Therefore, for some volumes that are already planned to be exported to China, transportation by rail may be more profitable than the option of loading into a tanker in the Baltic and then a 40-day voyage around Eurasia.

Argus experts estimate the potential volume of oil supplies to Kozmino by rail at 7 million tons per year. However, in reality, the achievement of such a level of shipments will be hindered by the lack of discounts from Russian Railways, as well as the high workload of the Eastern range. Also, Kommersant's interlocutors point out that there is now a shortage of tanks for transporting oil, since this segment of the market has been seriously declining in recent years. Russian Railways declined to comment.

The massive arrival of oil cargoes at the Vostochny polygon may further complicate the position of Russian coal miners, for whom this route is now the main export route. The fact is that oil, according to the price list, belongs to second-class cargo, that is, its transportation is paid higher than the transportation of coal (first class cargo). Previously, there was a special quota for the export of coal from Kuzbass, Khakassia, Buryatia and Tuva in the eastern direction, but now the rules for non-discriminatory access to the railway in the eastern direction have been suspended, and in fact this route is now primarily available to the most marginal cargoes, for which coal not applicable.

Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, estimates the maximum volume of oil shipments to Kozmino by rail at 4 million tons. He explains that the problem is not in the capacity of Kozmino, whose capacity is gradually increasing, but in the capacity of the Eastern test site.

Olga Mordyushenko



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