Case Study: Crude Oil in Central Europe PhDr. Tomáš Vlček, Ph.D. International Relations and Energy Security Department of International Relations and European Studies 43 14 10 20 14 6 9 20 3.25-5 8 30/27 27 22.5 13.5 6.8 Slavonski brod Pančevo Novi Sad Hamburg Köln am Rhein Rotterdam NWO NDO 16.3 8 RAPL 9 0.6 6 7.9 Crude Oil in Central Europe  Ingolstadt-Kralupy-Litvínov (IKL)  Adria  Bratislava-Schwechat-Pipelie (BSP) and Adria– Wien Pipeline (AWP)  Odessa-Brody-Adamowo-Plock-Gdansk  Spergau-Litvínov Druzhba pipeline  Oil was historically imported from various countries; but since 1955 exclusively from the USSR.  It was transported exclusively by rail.  In 1962, then first deliveries of oil came through the southern branch of the longest pipeline in the world – Druzhba (3,840 km). Druzhba pipeline was the first oil pipeline on the Czech territory (357 km).  In 1962 it was constructed to Bratislava and in 1965 extended to Záluží (today Litvínov).  Until 1989, Czechoslovakia imported annually up to 18 million tons of oil from the former USSR exclusively through this pipeline. Druzhba pipeline  The Russian Federation diversifies its customers, but it turns out that it cannot supply all transport routes  It seems Russians prefer certain routes at the expense of other routes  Historical problems in supplies to European customers are overwhelmingly not related to Russian one-sided politically motivated decision, but rather with transit countries  Efforts to transfer oil exports to tanker traffic, as well as the transition from oil exports to export petroleum products are actually real aspects of Russian energy strategy Baltic Pipeline System (zdroj: Oil & Gas Journal) 6 7 Interruption in Supplies of Oil in the CR Year Reason for Interruption 1990 Internal issues in the Soviet Union 1991 Disagreements between Russia and Ukraine over oil transport fees. Interruption covered by supplies via the IKL Pipeline. 1994 Supplies halted due to license issuance difficulties. 1995 Disagreements between Russia and Ukraine over oil transport fees. 1996 Disagreements between Russia and Ukraine over oil transport fees. 2007 Disagreements between Belarus and Russia over oil transport fees. Russia introduced an export duty on oil bound for Belarus, which introduced retaliatory measures leading to a further outage. 2008 Russia reduced oil supplies for the CR to approximately 50% of the negotiated volume. Probable relation to the signature of the CR-USA contract to locate a radar base in Brdy. The interruption was covered by supplies brought by the IKL Pipeline. According to Kostiugova, the reason for the reduction was the non-existence of a long-term contract between Czech consumers and Russian suppliers, along with Ukraine’s intention to supply oil in the direction of Odesa-Brody. 2009 The electricity outage in western Ukraine halted supplies of Russian oil in Europe. Threatened outage due to disagreements between Russia and Ukraine over oil transport fees. 2012 Reduction in planned supplies by approximately 80% in the second quarter of the year. Reason: completion of the BTS-2 system and surplus non-export capacity. Russian companies, especially Transneft, gave preference to supplies for destinations more advantageous in terms of price. Czech pipeline network Slovak pipeline network European pipeline network IKL IKL  Capacity 10 MTA  Continuation of TAL with the capacity of 43 MTA (upgradeable to 50) and then of TAL-NE with the capacity of 14 MTA  Key alternative route for the Czech Republic  Problem with the capacity at TAL, in 2013 transported 41.3 MTA, ie. 96% of capacity  Nominations availability 18 months in advance  Shareholders´ needs preference - MERO thus sought to purchase 2% of shares IKL  Success on September 25, 2012 - Contract for the purchase of a 5% stake from Shell Deutschland Oil GmbH  TAL is currently owned by 10 shareholders: ◦ OMV AG (25 %), ◦ Royal Dutch Shell plc (19 %), ◦ Ruhr Oel GmbH (11 %), ◦ C-Blue Limited (dcera skupiny Gunvor Group Ltd.; 10 %), ◦ Eni S.p.A. (10 %), ◦ BP p.l.c. (9 %), ◦ Exxon Mobil Corporation (6 %), ◦ MERO ČR, a.s. (5 %), ◦ JET Tankstellen Deutschland GmbH (daughter of Phillips 66; 3 %), ◦ Total S.A. (2 %). IKL  Before being a shareholder in TAL, MERO was in a position of a third party; shareholders´ requirements are prefered in expense of third parties  Currently, MERO has officially preferential right to free capacity TAL in volume according to ownership. Five percent of capacity TAL is 2.15 million tons of oil annually.  Ownership entry among the shareholders has another positive dimension. Everyone pays the same pipeline transit fare, but the shareholders of the pipeline at the end of the reporting period divides profit from transportation. This means their transport tariff is modified by the commercial profit from the operation of the pipeline.  Prior to the purchase of IKL could replace (at standard average supply) 30% of the volume of deliveries via the Druzhba pipeline  After the purchase it is up to 80% Adria Adria Adria Capacity of individual sections in relation to the ADRIA pipeline (MTA) Omišalj – Gola Gola - Százhalombatta Százhalombatta – Šahy Šahy - Bratislava Katov - Litvínov 20 6,9 – 14 3,8 (4,5) – 7,6 20 9 43 14 10 20 14 6 9 20 3.25-5 8 30/27 27 22.5 13.5 6.8 Slavonski brod Pančevo Novi Sad Hamburg Köln am Rhein Rotterdam NWO NDO 16.3 8 RAPL 9 0.6 6 7.9 BSP and AWP BSP and AWP Odessa-Brody-Adamowo- Płock-Gdansk Spergau-Litvinov Spergau-Litvinov Capacity of individual sections in relation to the Litvínov-Spergau pipeline Gdańsk – Płock Płock – Lunow Lunow – Schwedt Schwedt – Spergau Rostock – Schwedt 30 27 22,5 13,5 6,8 The existing capacity on sections from Gdansk to German refineries is sufficient to supply the Polish and partially German refineries. In the case of building the route Litvinov-Spergau and the emergence of new demand from the Czech Republic and Slovakia the capacity is not sufficient and the piping between Gdansk and Plock should be doubled. This would be compatible with the development project of the Odessa-Brody-Płock.