Ceska Rafinerska still struggling to agree on crude transport with Mero

By bne IntelliNews January 4, 2016

Ceska Rafinerska has agreed conditions on a new transport deal with state-owned oil pipeline operator Mero, Unipetrol - owner of the Czech Republic’s sole refiner - announced on January 4. However, the final terms are yet to be hammered out, with Prague and the refiner's Polish owner having danced around the issue of control for some time.

The two companies agreed on the conditions of transportation of crude oil into the Czech Republic via the IKL and Druzhba pipelines, the Czech sections of which are operated by Mero. The open-ended contract entered into effect on January 1, 2016.

However, talks between Ceska Rafinerska and Mero about transport fees continue, and a final agreement is not expected until the end of March. Transport fees have been a sticking point in negotiations going back to 2010.

Ceska Rafinerska  operates the country’s two oil refineries in Litvinov and Kralupy. The pair has a combined capacity of 8.7mn tonnes of crude per year. The Druzhba carries Russian oil to Litvinov while IKL links Kralupy to Adriatic terminals.

Unipetrol, owned by state-owned Polish oil company PKN Orlen has played a leading role at Ceska Rafinerska for some years, and bought full control in 2014. Czech governments, meanwhile, have long lusted to retake control of the refiner. The high fees charged by Mero, and state-owned oil products storage company and processor Cepro, have helped weaken profitability at Ceska Rafinerska and deter PKN from investment.

That has led to much speculation over potential ownership deals. Prague has mooted a push to take control via Cepro and Mero. On the other hand, PKN has suggested a merger, only with the Polish company retaining a controlling stake.

The Czech government insists Mero and Cepro are strategic assets and the state should keep control. Prague has expressed interest in buying Kralupy, but Unipetrol says it has no interest in selling. In September Czech media suggested that Cepro could join forces with energy holding EPH to buy Unipetrol.  


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