The FAS (Federal Anti-Monopoly Service) suggested fighting against it using an oil bank
There is a new turning point in the old problem of fast growth of sulfur level in Transneft system. The FAS suggested an idea to create an oil bank in order the companies producing sulfur crude oil should pay the other companies for reducing the raw material’s quality. But such scheme is considered as unrealizable; detachment of high-sulfur crude oil into a separate flow to Ust-Luga is considered to be a more realistic variant.
As far as Kommersant knows, Anatolii Golomolzin, deputy head of the FAS, suggested creating an oil bank at the meeting devoted to Transneft’s tariffs held in the presence of Arkadii Dvorkovich, Vice-Prime Minister. It could help to monetize the difference in sulfur content in the oil delivered to the monopoly’s system. Constantly growing production of high-sulfur crude oil (according to evaluation of Transneft, 3-3.5 million tons a year) reduces the quality of the raw material produced for export and has been causing arguments between the producing companies for a long time. Now the sulfur content in Urals oil of Tatneft and Bashneft is more than 2-2.3% while the allowable level is equal to 1.8%.
According to the suggestion of the FAS, the companies delivering sulfur crude oil will have to compensate the difference between the prices of their raw material and Urals to the producers of sweet crude oil with “real money”. To implement the idea, the FAS will have to ask for the companies’ data and monitor oil traffic and quality along its whole route, which is almost impossible: if just one company refuses to submit data, the whole system will not function. The Kommersant’s source familiar with the agency’s idea says that now it is at the initial level of development and it has little chance for being implemented. The FAS did not reply to the Kommersant’s request.
Transneft has already been using its own virtual oil bank for several years. Igor Demin, Advisor to the President of the Company, explained to Kommersant that it is a software package recording the delivered oil according to its density and sulfur content. “But it is an internal product and we can introduce it only to our customers,” he said. According to Mr. Demin, Transneft itself cannot control the level of the received high-sulfur crude oil, because it is not entitled to refuse somebody to access the pipe: “We have a huge number of system entry points and a large number of exit points. An oil company may demand the amount it delivered from each of them.”
The most realistic way of solving the problem can be a separate pipe for high-sulfur crude oil to Ust-Luga port. The Kommersant’s sources familiar with the results of the meeting held in the presence of Kirill Molodtsov, deputy head of the Ministry of Energy, with oil companies last week, say that this variant has already been under discussion for several years, but now the process is becoming active. It is referred to using the existing infrastructure with selective updating (construction of loopings and compressor stations). According to the Kommersant’s interlocutor, the Ministry of Energy and the largest companies supported the idea; producers from Tatarstan and Bashkortostan were traditionally against it. In 2015 Transneft estimated the costs for a separate pipe with sulfur content of 2.2% at 2.5 billion rubles upon pumping up to 23 million tons a year.
According to the Kommersant’s source related to the Ministry of Energy, now two more variants are being worked out. First of all, it is construction or modernization of refineries which were initially meant for high-sulfur crude oil. Such plant - TANEKO with the possibility of refining oil with sulfur content of 3.5% - has been already constructed in Tatarstan by TAIF. But now TANEKO uses oil with sulfur content of not more than 1.85%, which almost corresponds to Urals quality. Besides, there are no concrete facts: who should construct such refineries, for which amount and within which period. Another variant is oil compounding (controlled blending technology), but it requires corresponding infrastructure. “Now it is just the opposite - 12 million tons of Western Siberian light crude oil was turned to the East, where there are no problems with sulfur anyway,” says one of the Kommersant’s sources.
According to Kommersant’s information, transportation of Rosneft’s Siberian oil to China and growing sulfur content in the Western direction are the reasons for activation of discussing. The Ministry of Energy informed Kommersant that “assessment of the variants of securing quality of oil delivered to Russian refineries was conducted, including the variant of detachment of the high-sulfur flow to Ust-Luga port”, but the final decision has not been taken. Rosneft did not comment on the situation. We failed to communicate with TAIF group. Elena Kadochnikova, advisor of RISKOM association, thinks, that the easiest variant is construction of a separate pipe for high-sulfur crude oil: such oil has a bad impact on metal condition, and even in case of using the existing infrastructure it will have to be updated in a particular way.