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Russia warns Kazakhstan oil transit to Germany at risk over service payments, sources say

Russia has warned Kazakhstan its oil transit to Germany could stop in June due to a payment impasse in a stark reminder of the landlocked country’s reliance on Russia for its exports, sources said.

The warning from state-controlled pipeline operator Transneft is a reminder of Kazakhstan’s exports fragility with most of its flow of 1.5 million barrels per day or 1.5% of global supply going via various Russian pipelines.

Transneft operates the Druzhba oil pipeline, one of the world’s largest, capable of carrying 2 million barrels per day.

Flows through the Druzhba have dropped sharply since Russia’s invasion of Ukraine as the European Union refused to buy Russian oil.

The northern leg of the Druzhba system, linking Germany via Poland and Belarus, is currently used for Kazakhstan’s oil exports for the Schwedt refinery, which supplies most of Berlin’s fuel.

In recent weeks, Transneft has told Kazakh suppliers that Poland’s state-owned pipeline operator PERN has until June to pay for metering services at its Adamowo base the Polish-Belarussian border, according to three trading sources.

The existing service contract expires June 5, according to one source. The sources did not specify the terms of the new contract and how much money Russia wanted to be paid.

PERN has not paid so far due to concerns it could breach Western sanctions against Russia, one Polish source familiar with the situation said.

The company is working with counterparties on solutions, that could include using an alternative, certified metering system at Adamowo, adding that the security of its infrastructure is paramount, PERN said in an emailed response to Retuers questions.

“PERN has the technical capabilities and readiness to provide crude oil transport to the refinery in Schwedt, provided that suppliers and recipients are interested, and the operators of the other systems are ready to cooperate,” spokesperson Katarzyna Krasinska said.

Kazakhstan plans to ship 1.2 million tonnes of oil via Druzhba to Germany this year, with plans to increase exports to 2 million in the future.

Kazakhstan pipeline operator Kaztransoil said the plan remained unchanged and it was working with all relevant parties. It did not elaborate.

“Kaztransoil and KazMunayGas are quite nervous,” one source familiar with the matter said.

Transneft did not immediately respond to a request for comment.

Many Western companies such as Chevron, ExxonMobil, Italy’s Eni and France’s Total hold large stakes in oil and gas projects in Kazakhstan.

Schwedt was designed to refine mostly Russian oil coming via Druzhba but it also relies on deliveries by sea via the port of Rostock in Germany or Poland’s Gdansk.

Germany’s economy ministry declined to comment on company matters. A majority stake in the refinery has been under German government trusteeship since September 2022.
Source: Reuters (Reporting by Marek Strzelecki and Riham Alkousaa, Editing by David Evans)

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