The government is ready to ease the ban on diesel fuel exports
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As Kommersant learned, the government is ready in the coming days to partially lift the ban on diesel fuel exports due to the risks for oil refining associated with the overflow of Transneft storage facilities. It is assumed that only pipeline exports of diesel fuel will be allowed, and its volume may be subject to quotas to avoid surges in wholesale prices. The ban on gasoline exports will remain in force for now. Experts note that the easing of the radical restrictions introduced two weeks ago is technologically necessary so that refineries do not reduce their load.
The government may soon ease the ban on the export of petroleum products by removing pipeline supplies of diesel fuel from it, several sources told Kommersant. Such a decision could be formalized on October 4 at a meeting with Deputy Prime Minister Alexander Novak with the participation of oil companies. According to Kommersant, the easing of export restrictions will not yet affect gasoline.
We are talking about deliveries through the Transneft North and South product pipelines, which provide three-quarters of diesel fuel exports from Russia. The Sever product pipeline with a capacity of 25 million tons per year makes it possible to ship diesel fuel from the Nizhny Novgorod refinery of LUKOIL, the Yaroslavl refinery (a joint venture of Gazprom Neft and Rosneft) and the Kirishi refinery of Surgutneftegaz through the Baltic ports of Primorsk and Vysotsk. The Yug product pipeline with a capacity of 4 million tons is used to send diesel fuel for export from the Volgograd Refinery of LUKOIL through the port of Novorossiysk.
The issue of opening diesel fuel exports became acute after the diesel fuel storage capacity in the Transneft system was almost completely exhausted, and redirecting these volumes to the domestic market was almost technologically impossible. Against this background, large oil companies, according to Kommersant’s sources, have been actively pointing out to industry regulators in recent days the significant risks of reducing oil refining: after the refineries’ tanks were overstocked, the plants would have to reduce production, not only of diesel fuel, but also of other light petroleum products, including gasoline.
According to one of Kommersant’s interlocutors in the industry, it was assumed that the ban on the export of petroleum products, introduced on September 21, could last until October 10. According to Kommersant’s interlocutors, the introduction of the export ban was supported by Rosneft, the country’s largest fuel producer.
Two Kommersant sources claim that the government is thinking about introducing a quota mechanism for pipeline exports of diesel fuel so that its immediate resumption does not lead to a sharp increase in the exchange price of fuel, which has fallen by 25% since September 21. On October 3, the cost of diesel fuel in the European part of the Russian Federation at St. Petersburg MSTB decreased by 7.9%, to about 53.9 thousand rubles. per ton. Against this background, the increase in fuel costs at gas stations began to gradually slow down, but is still more than twice as fast as the inflation rate.
So far, the government has not had time to approve measures that should stabilize fuel prices after the lifting of export restrictions. The key mechanism on which the government is pinning its hopes is the damper, but the adjustment of its parameters has not yet been agreed upon with the Ministry of Finance (see Kommersant of October 3), although almost two weeks have passed since the introduction of the export ban. Also, the government has not approved the promised measures to combat “gray exports.” According to Kommersant’s interlocutors, it would be reasonable to announce the easing of the export ban in parallel with new damper measures, which could reassure the market.
Regulators are so far reluctant to comment on the issue of lifting the embargo on fuel exports. On October 3, Alexander Novak commented on the duration of its action: “As long as needed to ensure stabilization of the domestic market” (quote from TASS).
In the first ten days of the ban, oil companies preferred to store diesel fuel in the Transneft system and keep their own storage facilities as unloaded as possible, notes Victor Katona from Kpler, so “the emphasis on opening ports as soon as possible is appropriate, since for now they are the ones that are overflowing with goods.” According to Mr. Katona, it is likely that the reduction in export restrictions on diesel fuel will be realized through “piece-by-piece consideration of export batches.”
The average monthly level of diesel fuel exports in January-August 2023 amounted to 3.3 million tons, Petromarket reported, of which 2.2 million tons were shipped by pipeline transport without subsequent transshipment by rail, or 67% of the total export volume (240 thousand tons fell on pipeline-railway routes, 540 thousand tons on railway routes, and on other routes – 310 thousand tons). Lifting the restriction on pipeline exports looks like a measure that will allow excess fuel that will never be consumed in Russia to be removed from the country. On the other hand, the consulting company believes that maintaining restrictions on other export methods will help maintain the Russian market with a surplus in diesel fuel.
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