Russia faces oil delivery constraints if Belarus halts transit to Europe

Moscow may resort to oil production cuts in case the row with Minsk leads to a stoppage of Russian crude transit to Europe via Belarus, Reuters’ calculations showed.

The energy dispute is part of a wider row between Moscow and Minsk as the Kremlin seeks to cement its influence over its neighbor, which is seen as a buffer between the West and Russia.

Moscow and Minsk have had several oil and gas spats over the past decade, but the latest supply wrangle comes as the two ex-Soviet countries argue over how to implement a treaty aimed at full-blown integration.

Russia suspended oil supplies to refineries in Belarus from Jan. 1, though it partially restored them on Jan. 4, as both countries had failed to agree on terms of supplies for 2020. Transit to Europe so far has stayed intact.

Europe receives around 10% of its oil via the transit link, known as the Druzhba pipeline.

Following are some details on Russian oil supplies to Europe and alternative routes for deliveries bypassing Belarus:

DRUZHBA PIPELINE
Russia experienced a major interruption to its oil transit in 2019, when contaminated Urals oil into the Soviet-built Druzhba pipeline to Poland, Germany, Czech Republic, Slovakia and Hungary halted supplies via Belarus for more than a month.

Russia had to cut oil production due to transportation capacity constraints.

As a result, supplies of Russian Urals oil via the Druzhba pipeline fell to 43.9 million tonnes (880,000 barrels per day) in 2019 from 50.53 million tonnes in 2018.

Its operator Transneft has said it expects 50 million tonnes to be shipped through the pipeline in 2020.

Russian oil deliveries to Belarus slipped last year to 17.6 million tonnes from 18 million tonnes in 2018 through the pipeline.

Russia’s plans for combined oil supplies via Druzhba to Belarus and Europe stand at roughly 185,000 tonnes of oil per day in 2020. This includes around 135,000 tonnes per day supplied outside former Soviet Union countries.

Russia has some spare capacity in the pipelines connecting its oilfields with export ports and railways, which could help it bypass Belarus, but that may not be enough, Reuters calculations showed.

PORTS
As the dispute rolled on, Russia had to divert its oil flows to ports, raising plans for exports via the Baltic Sea outlets of Ust-Luga and Primorsk in January to 6.5 million tonnes from 5.9 million tonnes previously expected.

Current Russian supplies to Belarus’ two refineries varied from 13,000 tonnes to 21,000 tonnes per day in January. The sole supplier is Mikhail Gutseriyev’s Safmar Group.

This is far less than the planned 50,000 tonnes per day.

According to Reuters calculations, even with extra loadings added to Russian ports in January, the state has the capacity to supply around 75,500 tonnes per day more from its Black Sea and Baltic ports than it currently plans in February, using pipelines which connect oilfields with the ports.

It may add an extra 14,600 tonnes daily via its Pacific port of Kozmino to the February plan, Reuters calculations show.

RAIL, UKRAINE, BALTIC STATES
Russia can also use railways to send oil to Europe, though at a much higher cost than using pipelines.

Russia can deliver more than 10 million tonnes of oil each year to the West by rail to bypass Belarus, using ports in Latvia, Lithuania, Estonia and Ukraine.

Russia had previously used trunk pipelines to export Urals crude from the Black Sea ports of Odessa and Pivdenny in Ukraine, but has suspended those supplies due to high transportation tariffs and political tensions between Moscow and Kiev.
Source: Reuters (Reporting by Gleb Gorodyankin, Olesya Astakhova, Olga Yagova and Vladimir Soldatkin, editing by Louise Heavens)