Page 8 - FSUOGM Week 43 2019

FSUOGM PIPELINES & TRANSPORT FSUOGM
Polish imports of Russian oil down 20% in Q2
POLAND
Shipments slumped because of the Druzhba oil contamination crisis.
POLISH imports of Russian oil slumped 20% year on year in the second quarter, according to a report by the country’s central bank, as a result of the Druzhba pipeline system’s temporary closure and a change in a purchase contract.
The bulk of oil refined by Poland’s state- owned PKN Orlen and Lotos is still supplied by Russia via pipeline. But the pair have ramped up purchases in recent years from Saudi Arabia and other producers, to improve their supply security.
These diversification efforts paid off in the summer, allowing Polish refineries to keep run- ning after Druzhba, Russia’s main channel for oil supplies into Europe, was taken offline for 46 days after millions of barrels of oil were contam- inated with organic chlorides.
“The fall in imports via the pipeline was com- pensated by a strong increase in supplies via the sea,” the central bank said in its second-quarter balance of payments report, according to Reuters.
Poland increased deliveries from Saudi Arabia to compensate for the drop in Druzhba
flows, with the kingdom becoming its sec- ond-biggest oil supplier in the period, the bank stated. Total oil imports fell 14% between April and June, while their average cost increased to 257 zlotys ($67) per barrel from 234 zlotys a year earlier.
Poland’s national pipeline operator PERN expects to clear its system completely of all con- taminated Russian oil by July 2020. Organic chlo- rides are used to boost production at oilfields but can cause damage to refining equipment if left in the oil. Unlike refiners in neighbouring Belarus, PKN Orlen and Lotos were alerted to the con- tamination before any tainted oil reached their plants. But they still intend to seek compensation from Russia for the disruption in supplies. PERN will also seek redress for the cost of cleaning its pipelines.
Polish imports of coal also fell in the second quarter to 3.5mn tonnes from 4.5mn tonnes a year ago, the bank said, while the value of elec- tricity imports soared 70% between April and June to PLN1bn. ™
INVESTMENT
Gazprom sticks to spending plan
RUSSIA
Gazprom is scaling down investments
as several costly pipeline projects near completion.
RUSSIA’S Gazprom is sticking with its original target for capital investment in 2019, having often expanded spending plans multiple times in previous years.
The state gas giant’s board of directors approved plans on October 22 to spend RUB1.323tn ($20.8bn) this year, marginally lower than the previous guidance set last Decem- ber. The company will allocate RUB962bn to new projects, RUB180.5bn for acquisitions and RUB179.9bn for financial investments.
In previous years Gazprom has raised its annual spending target during the course of a year, sometimes several times, because of cost overruns or new projects and acquisition being approved. With just over two months before year-end, the company looks set to meet its orig- inal goal.
Gazprom is scaling down investments this year, after several years of record spending on costly pipeline projects. The company spent RUB1.344tn in 2016, raising its expenditure to RUB1.406tn in 2017 and an all-time high of RUB1.796tn last year.
Much of this funding has gone on Gazprom’s three main pipeline projects – Nord Stream 2, TurkStream and Power of Siberia. Power of Sibe- ria and the first string of TurkStream are now complete and are being filled with gas in prepa- ration for their launch by the end of this year. According to Gazprom, Nord Stream 2 is also due on stream by year-end. But Denmark’s delay in issuing a permit for its construction makes it unlikely that this schedule will be kept. It is cur- rently only around 85% complete.
Under preliminary plans, Gazprom’s spend- ing should fall further next year to RUB1.065tn, before rebounding to RUB1.251tn in 2021. Man- agement’s decision earlier this year to hike the dividend ratio of its net profits to 50% has been taken as a signal that the company is looking to adopt a more conservative spending strategy moving forward.
But while work on its current pipeline pro- jects is nearing completion, spending will remain high as result of similarly high-capex ventures it has greenlit this year, including the $11bn Baltic gas chemical complex.™
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w w w . N E W S B A S E . c o m Week 43 30•October•2019