UPDATE: Russian Oil Flow To Belarus Refinery Due To Stop Thursday
January 13 2010 - 7:26AM
Dow Jones News
Russian oil flows to Belarus' largest refinery could halt
Thursday, if the two countries fail to settle a pricing dispute,
Russian pipeline operator Transneft (TRNFP.RS) said Wednesday.
Russia began curbing supplies through the Druzhba pipeline to
Belarus' domestic market after a pricing deal between the two
countries expired Dec. 31. The situation has raised concerns about
midwinter disruptions to oil flows through a pipeline system that
supplies about 10% of the European Union's oil needs.
Deliveries to the Mozyr refinery, which has capacity to refine
95,000 barrels of crude oil a day, are due to stop Thursday unless
new supply contracts are signed, a Transneft spokesman said. Mozyr,
which is majority owned by Belarus' state energy firm Belneftekhim
and Russia's Slavneft (SLAV.RS), exports 80% of its production to
European countries.
"If the situation doesn't change, supplies will run out soon,"
he said. Transit through the former Soviet republic to refineries
in Europe is going as normal, he added.
Deliveries to the 88,000 barrel-a-day Novopolotsk
refinery--Belarus' second largest--will continue for about a week
under current contracts, the spokesman said.
Moscow and Minsk have failed to agree on new pricing terms for
2010. Until now, Moscow has taxed the crude that the former Soviet
republic refines domestically at about one-third the rate applied
to other international customers.
In recent years Belarus has annually used about eight million
tons of oil domestically, while another 13.5 million tons annually
were refined and re-exported at a hefty profit.
But now Russia is demanding that Belarus pays full customs
duties on the oil it doesn't consume domestically.
The new tax could deal a serious blow to the struggling and
largely isolated economy of Belarus. The extra duty could cost
Belarus an estimated $5 billion this year, more than 10% of its
gross domestic product, some experts say.
"Contracts are coming to an end, but we have enough oil for the
near future," an official from the Mozyr refinery said. New supply
contracts depend on the outcome of official talks between Belarus
and Russia, he added.
Officials failed Saturday to overcome their dispute, but both
sides say they remain willing to keep talking.
Three years ago, Russia briefly cut oil exports to Europe
through the Druzhba pipeline, as it quarreled with Belarus over
prices. That, along with a January 2009 natural-gas cutoff to
Europe caused by disputes with Ukraine, raised doubts in Europe
about Russia's reliability as a top energy supplier.
The Druzhba pipeline carries about 37 million tons of crude
annually through Belarus to refineries in Poland and eastern
Germany, which depend on the pipeline for nearly all of their
crude.
Company Web site: www.transneft.ru
-By Jacob Gronholt-Pedersen, Dow Jones Newswires; +7 495 232
9197; jacob.pedersen@dowjones.com
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