Page 6 - FSUOGM Week 38 2022

FSUOGM COMMENTARY FSUOGM

Germany seizes Russian

refining assets

Concerns have been raised about whether the Schwedt plant has an operational future.

RUSSIA THE German government has placed Rosneft’s Germany’s seizure of Rosneft’s plants could
refining interests in the country under state trus- “exacerbate an already acute energy crisis.” Rus-
WHAT: teeship, arguing the step was necessary to shore sia slashed gas flow to Germany via the Nord
Germany's government up the country’s energy security. Stream 1 pipeline to zero at the end of August,
has placed Rosneft's The move follows the government’s seizure citing technical difficulties due to sanctions,
refining assets in the of the German subsidiary of Gazprom in April, although the German government claimed the
country under state in order to block its attempted liquidation. It action was politically motivated. But Russia
trusteeship. subsequently renamed the subsidiary “Securing continues to pump oil to Germany, and Moscow
Energy for Europe,” and has provided funds to could retaliate by cutting off this supply.
WHY: keep it afloat. Although the move is only temporary, due to
Berlin has justified the Rosneft is the majority owner of the 230,000 last for six months, Rosneft has already described
move as necessary for its barrel per day (bpd) Schwedt oil refinery, with a it as an “irrecoverable loss of assets,” “illegal” and
energy security. 55% stake. It is only the fourth-largest refinery in an “expropriation.”
Germany, but it is seen as strategically valuable, “The move, in fact, may directly result in
WHAT NEXT: as it covers around 90% of the fuel needs of Ger- shortages,” BCS GM analysts said. “Urals crude
There are doubts about many’s capital, Berlin. The plant draws its crude supplied via the Druzhba pipeline has tradition-
how easily the refinery from the Soviet-era Druzhba pipeline. ally made up a substantial portion of the plant’s
will be able to obtain Rosneft made a bid to expand its share to 92% feedstock. Alternative supplies via the port of
alternative oil supply last year by exercising its pre-emptive right to Rostock and a linking pipeline can theoreti-
after the EU ban on Shell’s interest, but that deal was scuppered after cally provide about half of the plant’s needs, and
Russian crude comes into Moscow invaded Ukraine. the German government is hoping to receive
effect iin early December. The Russian company also has stakes in refin- Kazakh crude via Druzhba to replace the rest.”
eries in Karlsruhe and Vohburg, accounting for The Moscow-based brokerage warns that
12% of Germany’s overall refining capacity. with global oil shortages that will be exacer-
“The German government MBWK just bated if the EU pushes ahead with its embargo
announced that Rosneft Germany will be put on Russian supplies in early December, imports
under trusteeship of the German grid regula- via Rostock may not be an easy option. There
tor,” Jorg Kukies, the state secretary of German are plans for a €400mn update of the oil pipeline
Chancellor Olaf Scholz, said in a statement on connecting Rostock with Schwedt, boosting its
September 16. “This is a further step to assuring flow from 5-7mn tonnes per year to 9mn tpy
our energy security. We will support the trans- (180,000 bpd).
formation of the affected refinery locations.” Germany is also in talks to secure oil for
The government has said that Russian own- Schwedt from the Polish port of Gdansk. Ger-
ership of the plant was causing problems as local man Economy Minister Robert Habeck has said
firms were refusing to work with Rosneft. that talks with Warsaw are now “well advanced”
The step comes after the government on the option.
amended a key energy law in August allow- Amid concerns about the future operation of
ing the government to place companies with the Schwedt refinery following the loss of Rus-
“infrastructure critical to Germany’s security of sian oil, the government has pledged to invest
supply” under temporary trusteeship. As a last €825mn over the next 15 years in the plant and
resort, the government can even expropriate the the surrounding region. Local authorities have
assets. suggested it could be converted into a “green
Analysts at BCS Global Markets warn that refinery." ™

P6 www. NEWSBASE .com Week 38 23•September•2022