Only Weather Can Dampen Export Growth
Monday, Oct. 15, 2001.
By Dmitry Zhdannikov
Reuters Russia will export record volumes of crude and oil products this winter, notwithstanding lower world prices and possible OPEC output cuts, traders said Friday.
The growth concerns crude as well as refined products, which Russian refineries are manufacturing in increasing quantities, but need to export for lack of well-paying domestic markets.
Only bad weather could prevent Russia from substantially boosting energy exports in coming months, market players say. "If there are no excessively long storms in Novorossiisk, the all-time high figure will be easily reached this year," said Eugene Khartukov, director of the Moscow-based Energy Studies University.
Traders see oil exports from the former Soviet Union rising by at least 8 percent in 2001 and by another 5 percent to 7 percent in 2002, when Russia opens new export routes. Russian oil production is expected to rise to 340 million to 350 million tons (2.5 billion barrels) in 2001 from 323 million tons in 2000, while exports are set to touch 155 million tons -- up from 143 million in 2000.
Russia already had a record export year in 2000, surpassing Soviet-era crude export volumes of 120 million tons in the days when the Soviet Union was the world's largest oil producer, with 600 million tons of annual output. But limited crude export routes together with rising output are also encouraging Russia to send more fuel and diesel abroad.
Russia's quest for revenues has in the past prompted it to boost exports even in years when world oil prices were low and OPEC cut output to shore them up.
Russia exported 113 million tons of oil in the first nine months of 2001, up from 105 million in the same period of 2000. Russian oil firms are allowed to ship abroad only one-third of their output, with the schedule for shipments being set in the beginning of every quarter.
"The government has set a schedule of 31 million tons of crude for the fourth quarter for Russian producers and another 4 million tons for crude from Kazakhstan and Azerbaijan," a Russian trader said. "It was hard to imagine even two years ago sending these volumes abroad during the winter. Now it is possible due to new routes," he added.
Traders said extra volumes might be shipped now through the upgraded Black Sea port of Novorossiisk, where annual capacity has been boosted to 43 million tons from 32 million tons.
The Lithuanian port of Butinge worked for the first time at full capacity in September, and other major routes are expected to be operational by the end of this year. This includes the Baltic Pipeline System, which can ship up to 12 million tons of Siberian crude through the Primorsk terminal on the Gulf of Finland, and the Caspian Pipeline Consortium link, which is designed to ship up to 28 million tons of Kazakh crude to Novorossiisk.
"The Russian government has also recently lowered domestic railway tariffs, making some exotic routes profitable," said a Western trader. He said oil companies were also now shipping crude by rail to Novorossiisk and the Baltic Sea port of Ventspils in Latvia.
"New tariffs also have made shipments to the ports of Odessa and Tuapse profitable," said Davor Stern, head of downstream for Tyumen Oil Co., or TNK, Russia's No. 3 oil producer.
A Western trader, however, said the so-called exotic routes would remain profitable as long as oil prices stayed above $17 per barrel. Russian Urals on Friday stood at $20.13 per barrel -- an 85 cent discount to Dated Brent.
Exports of fuel oil and gas oil will also be high this year. Russia increased fuel oil exports by 11 percent to 15.8 million tons in the first half of 2001. Gas oil exports were down 6 percent to 11.8 million tons, but traders said this would rise in the last quarter of the year.
TNK's Stern said Russian firms might boost oil product exports in the event of a sharp fall in crude prices. "There is not enough of a domestic market for oil products. The tendency now is to refine more because, beyond export tax and quotas, there are no big restrictions," he said.
In order to prevent winter heating-oil shortages, the government in September slapped a 32 euro-per-ton tariff on fuel oil and gas oil exports and said refineries could export a maximum of 20 percent of Russia's overall fuel oil output. But traders said the impact of the step would be small.
"These restrictions have never really affected fuel oil shipments," one trader said. He said the measure was purely formal, as the 20 percent figure was set as an average, which meant restrictions were also imposed on refineries that have never been fuel oil exporters. "Refineries which are closer to European borders will still send abroad their entire fuel oil output," he said.
Traders expect gas oil exports to rise considerably in the second half and especially in the fourth quarter, when the end of the harvest season cuts domestic demand.
"The only problem is that Europe is full of gas oil right now, especially stocks in Germany, which are very important for Russian exporters," a Russian trader said. |
