Page 5 - bne IntelliNews monthly magazine December 2024

bne December 2024 Companies & Markets I 5
6,400 to 7,500 cubic metres per hour. The improvements will add about 5mn tonnes (100,000 bpd) to the current annual operational capacity of 43mn tonnes (860,000 bpd).
Pantůček said in response to questions from NewsBase that he expects certification, testing and the installation of backup pumps to be completed in the first half of 2025.
The 753-km TAL originates at a marine terminal in Trieste, Italy, and is the primary source of oil for refineries in Austria and the German states of Bavaria and Baden-Württemberg. Currently, TAL and Druzba each supply about half Czech crude demand.
Mero is financing the systemwide improvements at a cost of between CZK1.3-1.6bn ($55-68mn). Storage capacity at Mero’s bunkering facilities in Germany and the Czech Republic is being upgraded as well.
The pipeline operator has also modernised the 347-km Ingolstadt-Kralupy-Litvínov (IKL) pipeline, which was completed in 1996 and transports oil from TAL in Bavaria to Czech storage tanks in central Bohemia. The updates to the IKL control and security systems cost CZK265mn ($11mn).
The impetus of war
The TAL capacity expansion had been considered for years. But the project gained urgency after the EU banned most Russian crude and refined petroleum product imports and imposed an oil price cap following the Kremlin’s February 2022 invasion of Ukraine. Temporary exceptions were provided for those countries in Central Europe that lacked enough access to alternative sources of oil besides Druzhba, including the Czech Republic.
Agreement on TAL-PLUS was announced by Czech Prime Minister Petr Fiala in May 2023, capping months of negotiations between the Czechs and other TAL Group shareholders. Mero owns a 5% stake in TAL.
“It is important to note that the project has been ongoing for an incredibly short period of time,” Mero’s Pantůček said. He added that “all components had to be tendered according
to the law, and at the same time, there are very complex technologies that often consist of components from all over the world. Installation is under way in Italy, Austria and Germany, and very soon we will see that the Czech Republic will be able to cut itself off from Russian crude oil.”
Druzhba, or 'friendship' in Russian, was completed in 1964
to supply Soviet oil to Czechoslovakia, East Germany, Hungary and Poland along a 5,500-km corridor originating in Siberia and transiting Russia, Belarus and Ukraine. TAL became operational three years later on the western side of the Iron Curtain.
Czech oil dependence under scrutiny
The Czech Republic has faced controversy for its lingering dependence on Russian oil, despite lacking feasible
alternatives – that is until TAL-PLUS is up and running.
Along with Slovakia and Hungary, the Czech Republic was granted an exception to EU’s sanctions on Russian crude imports to give it time to find alternatives. But some analysts have accused these countries of using the waiver to profit from discounted Russian oil.
“In reality, Russian oil purchases have barely changed. Pipeline oil exports contributed €2.5bn ($2.7bn) to Russian export revenues in the first half of 2024 alone, around one-fifth of that coming from the Czech Republic,” according to an analysis by the Helsinki-based Centre for Research on Energy and Clean Air, released in mid-October.
The CEE Bankwatch Network, an environmental watchdog in Prague, has accused the Czech government of caving in to the oil majors behind TAL by backing the costly upgrade. “The Czech Republic needs to substantially step up efforts to decrease oil demand, not to satisfy it,” according to Bankwatch.
Energy security and the future of Druzhba
As the Czech Republic prepares to enter an era without Russian oil, the state pipeline company is working to ensure maximum physical security and security of supply amid heightened geopolitical uncertainty. Incidents such as the ransomware attack on the Colonial pipeline in the US in
May 2021 and the Nord Stream gas pipeline sabotage in September 2022 are harsh reminders of energy infrastructure vulnerability.
“Defence against physical and cyber-attacks is an absolute priority,” Pantůček said. “We also have very detailed control systems and inspection elements that detect any damage. Close communication with all partners and prepared security plans are a certainty.”
“If an outage were to occur,” Pantůček added, “then the emergency reserves of crude oil in the system of the State Material Reserves Administration, which the Czech Republic retains for this very reason, can be used for a certain period.”
Meanwhile, Druzhba may get a new lease on life as Mero explores ways to repurpose the Czech pipeline segment following years of modernisation and investment.
“Mero ČR is responsible for ensuring that the condition of the Druzhba crude oil pipeline in the Czech Republic is at the best level and corresponds to the standard of international oil infrastructure,” Pantůček told NewsBase.“Therefore we regularly invest in the crude oil pipeline in regards to its necessary maintenance and cleaning. We also want to find
a new use for the Druzhba crude oil pipeline when Russian crude oil no longer flows through it. That is the reason why it is necessary to maintain it.”
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