Unipetrol, owner of the Czech Republic’s two main refineries, announced on November 22 that it has signed headline terms on an agreement on crude oil transportation with Croatia’s Jadranski Naftovod, operator of the JANAF pipeline. The deal potentially opens up an alternative route to tap supplies from the south.

The agreement offers the Czech Republic a third potential supply route for crude oil, which is viewed as a significant step in improving energy security. A reduction in supply from Russia in 2012 - at the time the only reliable supplier - shocked Polish-owned Unipetrol as it sought feedstock for the Kralupy and Litvinov refineries. Prague has since bought into the TAL pipeline linking to Trieste.

The transportation conditions with Jadranski Naftovod were concluded for a period of three years. The pipeline can supply both refineries Unipetrol said. The company - which is controlled by Polish state-controlled refiner PKN Orlen - is also negotiating contractual transportation conditions through the Hungarian part of JANAF. Unipetrol believes that the contract could be concluded during 2017.

The JANAF pipeline - majority owned by Zagreb - starts at the Omisalj Terminal on the Croatian island of Krk and runs through Croatia, northwards to Hungary and Slovakia where it connects to the Druzhba. Installed capacity is 20mn tonnes per annum.

“From the perspective of the Czech Republic, this contract means a further step towards strengthening the security and stability of crude oil supplies,” said Andrzej Modrzejewski, Unipetrol CEO in a joint statement. “It will enable crude oil transportation via the JANAF pipeline through Croatia and could be utilized in the future for example in case of supply of alternative crude oil grades.”

“The crude oil transport for Unipetrol represents a new business opportunity for us,” added Dragan Kovacevic, chairman of JANAF. “JANAF will provide to Unipetrol a safe and reliable transport of numerous crude oil grades. We hope for more intensive business cooperation on the activities of crude oil transport and storage in the years to come.”

The Czech Republic experienced the problems associated with limited supply lines in 2012, as Russian crude delivered via the Druzhba pipeline all but dried up. Speculation at the time suggested Moscow was testing the potential to demand higher prices. Unipetrol was forced to shutter Kralupy due to the shortage.

Prague took the events as a lesson, and soon after bought into the TAL pipeline, which carries oil supplied by Azerbaijan, Kazakhstan and Iran via the Italian port of Trieste. That handed the country priority access to the route, which is currently its only alternative to Russian imports.