Russia pours oil on troubled Czech waters

By bne IntelliNews April 11, 2012

Tim Gosling in Prague -

Russia attempted to calm worries over crude supplies to the Czech Republic on April 10 following reports that new oil terminals on the Baltic Sea are draining up to 80% of deliveries to the Central European country through the main Druzhba pipeline.

Whilst Russia has tried to shrug off the reports until now, it is apparently concerned enough over what is becoming yet another dent in its reputation as a reliable energy supplier to try to sooth the situation. It probably doesn't hurt the Czech cause either that Russian nuclear holding Rosatom is pushing hard to clinch the €8bn contract from Czech utility CEZ to expand the Temelin nuclear power plant.

Either way, state-controlled Gazprom Neft is said to have agreed to double its quota of Urals blend to be run through Druzhba to the Czech Republic in the second quarter of 2012 to 400,000 tonnes, traders told Reuters. The oil arm of Gazprom has swapped quota's with Russia's biggest oil producer Rosneft. The gas giant was heavily criticized, both in Europe and by the Russian government, in February when gas exports to several EU states dropped in the middle of an extreme cold snap across CEE.

On April 9, Russian oil pipeline monopoly Transneft reported that it had no more than three days worth of crude for delivery to the Czech Republic via Druzhba, and claimed that it is not barring supplies, but rather that oil producers are not delivering to the Czech route. However, it made more conciliatory noises in the direction of Prague on April 10, saying in a statement: "The company is ready to deliver all the contracted volumes of hydrocarbons in accordance with the approved second-quarter 2012 supply schedule."

Rosneft and Russia's largest privately-held oil company Lukoil have quotas of 500,000 tonnes each on the route in the second quarter, with Gazprom Neft originally due to supply the remainder of the 1.2m tonnes through the period. However, with Russia opening a large oil terminal at the Baltic port of Ust-Luga, crude has been diverted from Central Europe, with routes in Germany and Poland also seeing falls in volume.

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