Russian state-owned pipeline operator Transneft plans to halt oil product operations at Latvia's ports of Ventspils and Riga as of 2018, and redirect the volumes to the Russian Baltic Sea ports of Ust-Luga and Primorsk and the Black Sea port of Novorossiisk, the company's CEO Nikolai Tokarev said.
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"We will re-orient the cargo turnover from the Baltic ports of Ventspils, Riga to our Baltic ports -- of Ust-Luga and Primorsk -- as well as to Novorossiisk," Tokarev said during a meeting with Russian President Vladimir Putin late Monday.
The turnover at the Latvian ports is to shrink to 5 million mt this year from 9 million mt last year, he said.
"By 2018 we will reduce this cargo flow to the Baltic states to zero. We will fill up our ports, because there is capacity surplus," Tokarev said.
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Refineries currently allow to load up to 32 million mt of oil products along the product pipeline system annually, he said.
Transneft plans to convert some of the pipeline capacity that is not being used for crude to transport oil products to Primorsk and Novorossiisk.
Currently a former crude pipeline, the Yaroslav-Kirishi 2, is being converted to carry diesel to Primorsk and is due to be operational in October.
It is currently being filled with ultra low sulfur diesel, according to traders.
The converted pipeline, which will run along the already functioning Kstovo-Primorsk trunk, will allow Transneft to expand the capacity of the so-called North, or Sever, diesel pipeline running to the Baltic port of Primorsk to 25 million mt/year from November 2017, earlier than the previously planned 2020.
The move is part of a long-running plan to encourage greater oil product exports via Primorsk, where Transneft also hopes to offer Russian companies attractive terms, the company said last year.
The diesel pipeline project to Novorossiisk, which envisages deliveries of 15 million mt/year after 2020, is also under construction. The project, dubbed the South, or Yug, includes building links from the Volgograd refinery to the Tikhoretsk station and further to Novorossiisk, to be completed in 2018. Refineries in the Krasnodar region in southern Russia will also join the pipeline.
Later on, by 2020, refineries around Samara on the Volga region are expected to be linked to the pipeline.
Oil product exports via Novorossiisk and Primorsk totaled 19.15 million mt in January-July, according to data from operator Novorossiisk Commercial Sea Port (NMTP).
Russia exports only diesel via pipeline, with currently two pipelines shipping Euro 5, or 10 ppm max sulfur diesel, to the Baltic ports of Primorsk and Ventspils.
Gasoil continues to be shipped by rail, but Baltic ports have become an outlet for a large proportion of all ultra low sulfur diesel supply to Northwest Europe. Last October the pipeline to Ventspils fully switched to 10 ppm diesel flows.
The switch from non-Russian to Russian loading ports is not expected to affect overall ULSD volumes, traders said.
"There will be no change. Just non-Russian ports losing volumes and Russian ports gaining volume...so, an increase at St. Petersburg, Primorsk, Vysotsk and Ust-Luga and decreases at Ventspils, Riga and Klaipeda," a source said.
Russian products flows through the Baltic ports - Sillamae, Klaipeda, Riga, Tallinn, had all been dwindling. Russia halted crude exports via Ventspils more than a decade ago, but continued to ship gasoil and subsequently ULSD via the pipeline to the Latvian port. But transshipment volumes through Ventspils Nafta Terminals on the Baltic Sea have been steadily declining.
Ventspils, which is majority owned by trader Vitol, handled 4.29 million mt of oil products in the first half of the year, down 27.3% from a year earlier. Russian pipeline volumes continued their downward trend in H1, with LatRosTrans transporting 2.4 million mt, down from 2.98 million mt in H1 2015. The terminal also handles products delivered by rail from Russia and Belarus.
--Edited by Jonathan Dart, email@example.com