- Talks with Kazakhstan for substitute flows are still ongoing
- Voluntary ban on Moscow’s crude starts in a few days
According to Bloomberg article published on December 28, 2022, Germany’s government is confident that a key refinery that provides Berlin and swaths of the eastern part of the country with fuel is well positioned to keep running even as the nation is set to begin its ban on Russian oil in the coming days.
The PCK Schwedt refinery, which depends on Urals crude via the Druzbha link, “has made good preparations in recent months and will be able to produce without Russian oil in January,” a spokeswoman for the Economy Ministry said in a statement to Bloomberg News.
The plant will continue to produce “at a comfortable, good level of capacity utilization,” she said. That’s partly thanks to assurances from Poland, which can ship additional volumes via Gdansk.
The reassurance comes amid market fears that the refinery would be forced to severely cut production if shipments via the Druzbha link were to come to a total stoppage, and as negotiations with Kazakhstan for supplies are still not concluded. Germany is under extreme pressure to find alternative energy supplies, with the nation standing by a pledge to halt all piped oil imports from Russian in 2023.
Germany has taken a harder stance against pipeline oil flows from Russia than some other European countries. The supplies are exempt from the European Union’s ban on most seaborne imports, which started on Dec. 5. Poland also pledged to wean itself off by December.
Russia’s oil major Rosneft PJSC had a stake in the PCK Schwedt refinery, until German’s government seized control over the local unit earlier this year. In addition to Schwedt, TotalEnergies’ Leuna refinery has also been dependent on Russian oil from the Druzbha pipeline.
To bolster both those refineries, a pipeline from the German port of Rostock is currently being upgraded, but the capacity is too small to substitute flows in the short term.
“From January, the pipeline from the port of Rostock will be fully booked according to its capacities,” the Ministry spokeswoman said.
Kazakh Oil
The refineries are negotiating with Kazakhstan over oil deliveries, but there are still many hurdles, mainly because the crude would have to be piped via Russian territory.
Still, under the current sanctions, it’s permissible to use the existing pipeline network for Kazakh oil, according to the Economy Ministry.
“Due to the nature of crude oil, mixing of crude oils during transport in pipelines and tankers is unavoidable and also permissible under the EU sanctions,” the spokeswoma said, adding that the “the mixing must not increase production or sales of Russian crude, or otherwise generate avoidable benefits for Russian companies, except for the necessary transportation costs.”
Kazakhstan’s KMG Trading, a subsidiary of state oil company KazMunayGas JSC, puts 13 million tons a year into the Russian pipeline system and is allocated an equivalent amount of Urals that it can then sell internationally. However, Kazakhstan’s oil producers haven’t submitted any official request to Russia’s Transneft to ship oil to Germany via the Druzhba pipeline in January, according to spokesman Igor Dyomin.
“All the January requests for shipments via Druzhba have been formed, and as of now there are no Kazakh volumes to be shipped toward Germany,” he said. “It’s possible to make changes to the January shipment plan, but only for the second half of the month.”
