Page 17 - FSUOGM Week 20

FSUOGM POLICY FSUOGM
Russia mulls creating strategic oil reserve
RUSSIA
The proposed reserve would be equivalent to up to 20% of Russia’s annual oil production.
THE Russian Energy Minister is reviewing a proposal to create a strategic oil reserve equal to up to 20% of the country’s annual oil output, local media reported on May 15.
Creating such a system of storage facilities would help ensure Russian energy security, Pavel Zavalny, who heads the Duma’s energy com- mittee, explained in a letter to Russian Deputy Energy Minister Pavel Sorokin.
“This issue is under consideration,” a ministry representative told Russia’s Prime news agency on May 15.
Zavalny, who also heads the Russian Gas Society (RGS), argued that the importance of storage had been brought to the forefront since the oil price collapse two months ago. Demand losses as a result of the coronavirus (COVID-19) pandemic have led to some countries running out of space to store oil and an unprecedented number of tankers being stuck at sea without a market for their oil. Russia stands out among other major oil suppliers and consumers such as Saudi Arabia and the US in lacking a strategic reserve.
Having such a system would not only improve supply security but would also be an efficient and
profitable business that would help regulate and balance the global oil market, Zavalny argues. It would enable producers to store oil when prices are low and sell it when the market recovers, avoiding well closures.
Russia has discussed creating a strategic reserve for years, but the plan has been crit- icised for being costly and unnecessary. The RGS believes that it would be necessary to cre- ate a reserve equal to 10-20% of Russia’s annual oil production, which reached 561mn tonnes (4.11bn barrels) last year. Creating one of that size would take 10-12 years.
At present the nearest thing Russia has to a strategic reserve is the storage facilities belonging to state pipeline operator Trans- neft, which can hold up to 30mn tonnes (220mn barrels) of oil. Of this capacity, around 85% is for crude oil and the rest for petroleum products.
The RGC said it had asked the country’s leading oil and gas companies to take part in a study of the scheme. The society “looks forward to getting the [support] of the energy ministry in exploring the prospects of creating oil storage systems in Russia,” it said. ™
Rosneft to deliver 9mn t of oil to Belarus
RUSSIA
Belarus has been buying oil from Saudi Arabia and the US.
RUSSIAN state oil major Rosneft has signed contracts with Belarusian companies for the sup- ply of up to 9mn tonnes of crude oil in April-De- cember, according to Reuters.
Earlier officials in Minsk have said that Bela- rus received about 2mn tonnes of oil in April. As much as 1.56mn tonnes was delivered from Rus- sia by pipeline and by rail. The rest was delivered by tankers and extracted in Belarus.
Russian companies will supply oil to Belarus without a premium, which Minsk has refused to pay in January-March, according to Prime Minister of Belarus Sergei Rumas. “Since late 2019 Belarus has been negotiating the acquisi- tion of Russian oil for our oil refineries without a premium,” he said in March. “All the Russian companies will be able to supply oil without a premium.”
Premiums paid to Russian companies were as high as $11.7. Russian companies will reduce this premium by $7. In other words, the companies will supply oil with a premium of $4.7. It will be settled by interbudget transactions, according to Rumas.
In Janaury-March, Belarus was hit by a severe shortage of Russian oil for its two refin- eries – major money-spinners for the economy – as Moscow halted crude supplies to Belarus on January 1 after a contract expired, and the two
countries are still in negotiations over a new agreement.
Minsk said later in January that it had secured a temporary limited solution on shipments from companies of Russian oligarch Mikhail Gutseriev, without paying a premium. In previ- ous years Belarus bought oil on terms similar to those for Russian independent refineries, which involved a small premium.
On January 24, Belarusian President Alex- ander Lukashenko pledged to purchase crude oil “in America, Saudi Arabia and the UAE” following Moscow’s refusal to deliver oil to the post-Soviet nation in 2020 on Minsk’s terms.
In February, Lukashenko pledged to siphon off Russia’s transit oil from the Russia-EU Dru- zhba oil pipeline, if Moscow failed to supply the “necessary volume” of oil in February. The pipe- line splits into two routes in Belarus: a northern leg runs to Poland and Germany, and a southern leg to Ukraine, the Czech Republic, Hungary and Slovakia.
Belarus has bought the first batch of 80,000 tonnes of crude from the Saudi Arabian national oil company (NOC) Saudi Aramco, the nation’s petrochemical conglomerate Belneftekhim said on April 29. It has also hailed the delivery of its first shipment of US oil.™
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