Poland, Russia strike deal on continued Kazakh oil transit to Germany

Poland, Russia strike deal on continued Kazakh oil transit to Germany
Oil flows to Europe from Russia used to be diverse and heavily used prior to the latter's invasion of Ukraine. Sanctions on Russian oil do not prevent crude from Central Asian countries from using the same infrastructure to reach Europe. / bne IntelliNews
By Newsbase May 28, 2024

Pipeline operators in Poland and Russia have reached an agreement that will enable transit of oil from Kazakhstan to continue to Germany, sources told Reuters on May 24.

Without the deal, transit might have been halted, as Russian oil transport operator Transneft warned Kazakhstan in April that deliveries to Germany could be ended by June 5 because of disagreement over certifying oil flow meters in Poland. Polish pipeline operator PERN had been concerned that it could violate Western sanctions against Russia, according to Reuters.

PERN, Transneft and Germany’s PCK Schwedt refinery, which receives the crude, have agreed that a non-Russian company will service the oil flow meters on the Polish section of the Druzhba pipeline, according to Reuters. The company is from Slovakia.

Germany was formerly one of the biggest buyers of Russian oil in Europe, but stopped imports from the country at the end of 2022, securing seaborne alternatives and purchasing oil from Kazakhstan instead. However, Transneft’s warning highlights that Germany remains dependent on Russia as a transit route for Kazakh crude. Around four-fifths of Kazakh crude is delivered to market through Russia, and Kazakhstan’s progress in expanding the use of alternative routes, including across the Caspian Sea to Azerbaijan, has been slow.

The Schwedt refinery is responsible for the majority of fuel supply in Germany’s capital Berlin. Under the supply deal with Kazakhstan, Germany is due to receive 1.2mn tonnes per year (24,000 barrels per day) of oil for the plant, equivalent to less than 10% of the refinery’s processing capacity. The refinery is currently running at around 70-80% of capacity, sourcing the rest of its oil from German and Polish ports.

The contract for Kazakh oil will run until the end of this year. 

Russia’s largest oil company Rosneft previously held a majority stake in Schwedt, but the German government placed this interest under a trusteeship in September 2022. Rosneft’s lawyers said the government was considering the nationalisation of the stake in February, but instead, Berlin opted to extend its trusteeship over the asset for a third time, until September this year.

There were concerns that nationalisation might cause Russia to seizure remaining German-held assets in Russia. In December 2023, Russian President Vladimir Putin had ordered the state’s takeover of interests in Western Siberian gas fields held by Germany’s Wintershall Dea and Austria’s OMV.