Ust-Luga may handle oil cargoes in March-Transneft
Thursday, 23 February 2012 | 00:00
Russia's new Ust-Luga Baltic oil terminal, undergoing repairs after damage caused by multiple landslides, will be ready to start loading crude in the coming weeks and may handle a few cargoes in March, a spokesman for Transneft said.
"It is not yet on the (Transneft) loading schedule, but it is possible there will be several cargoes in March," Igor Dyomin, a spokesman for the state pipeline monopoly, said by telephone.
The terminal had a false start late last year, when cargoes were awarded by top Russian oil producer Rosneft for December lifting from the new facility, but by mid-November the quay had been hit by three landslides, putting off its launch to early 2012.
Traders said last week that oil company Surgutneftegaz had offered a cargo for lifting in Ust-Luga, where the second phase of the Baltic Pipeline System terminates, at the end of February.
"The main repair works have been completed, and we are ready to launch BPS-2 at the end of February or early January," Dyomin said.
It remained unclear whether regular loadings would commence from March. Several traders said the port would load a handful of cargoes each month, gradually ramping up volumes to 10 cargoes per month by June.
Vedomosti newspaper reported on Friday that Russia's industrial safety watchdog thought the quays might need several months' work.
UST-LUGA BEFORE FRIENDSHIP
Uncertainty around the port's launch date is likely to force sellers to offer crude oil for lifting from Ust-Luga at a discount relative to the more established Baltic terminal at Primorsk, traders have said.
It could also find a limited range of buyers until international oil companies add it to their lists of approved ports for tanker traffic, traders said.
In addition to uncertainty surrounding the ultimate launch date, economic questions also hung over Ust-Luga as traders tried to weigh the economics of exports via the new terminal against rival routes, including Primorsk.
Ust-Luga's netback potential is so far untested, and use of the route would depend on the pipeline tariff and transshipment cost.
Even if transshipment costs are no higher than in Primorsk, one trader said, the total cost per tonne of crude loaded at Ust-Luga could be $3 higher.
"It will take $300,000 straight off the top" of each 100,000 tonne cargo, he said.
With Russian oil output roughly unchanged from month to month at around 10.3 million barrels per day and unlikely to rise, traders said other routes could lose volume, including the Druzhba (Friendship) pipeline to central and Eastern Europe.
Rosneft, for one, has increased its deliveries via Druzhba to supply its partly owned refineries in Germany to minimise the cost of crude oil purchases, which hit the company's bottom line in the fourth quarter.
"Germany and Poland will be first in line" for cuts to supply Ust-Luga, a trader said.