The Ministry of Energy believes that the transshipment of crude oil must be conducted from Russian ports. The experts say it is more profitable for oil majors to work directly with their traders.

Last week, as reported by “Kommersant”, Vladimir Putin held a meeting in which, in particular, the construction of Summa’s crude oil terminal in the port of Rotterdam was discussed. Sources of “Kommersant”, people familiar with the results of the meeting, say the idea of a guaranteed crude supply for the terminal was not supported neither by Alexander Novak, the Head of The Ministry of Energy, nor by the leaders of Lukoil, Gazprom Neft, Rosneft. According to one of the interlocutors of “Kommersant”, the Ministry of Energy found that the profitability of the terminal is questionable. “In addition, the project has legal risks. For example, the arrest of Russian oil under the claim between Yukos shareholders and Group MENATEP Limited (the arbitral tribunal in the Hague calls on Russia to pay the company $ 50 billion compensation),” – he said.

Summa Group has planned to commission the terminal in the port of Rotterdam (in 2017) for Urals deliveries from the port of Primorsk (which is a part of the NCSP, in which a joint venture of Summa Group and Transneft controls 50.1% of the shares) and the product trade on FOB terms from Rotterdam. It was assumed that the establishment of such platform will reduce the price gap between Urals and North Sea Brent and will make the Russian brand more competitive. The terminal’s planned storage capacity was 3.2 million cubic meters, the project cost was about € 750 million. Shtandart TT B.V. (controlled by Summa Group) is responsible for the project. In 2011 together with VTTI B.V. (a consortium of Malaysian trader Vitol and MISC Bhd) it won the construction tender. In early 2014 VTTI withdrew from the project by selling 25% of its shares to Summa. The construction works were supposed to begin in 2013, but those were repeatedly postponed, and ultimately the final date was named – February 2015.

Another source of “Kommersant” claims that the meeting did not cover the questions related to the guarantee of crude oil supplies to the port of Rotterdam, but instead, it was discussed whether to start the project of Urals brand as an international standard development and whether to make the terminal of Summa Group an integral part of the project. At the same time, the source said, no one denied the idea of Urals introduction to the stock exchange, everyone agreed a movement towards implementation should be made. So far the Ministry of Energy and the industry has no clear understanding how to do it. Summa Group declined to comment and the representatives of oil companies have not responded to the inquiries of “Kommersant”. The Ministry of Energy stated “it is believed it is necessary to create a marker grade”, but crude loading should be done in the Russian ports of Primorsk and Ust-Luga.

On the 10th of June Alexander Novak, the Head of The Ministry of Energy, has indicated there may be loading difficulties of Rotterdam terminal. The state can not oblige oil companies to supply the location with oil. According to “Kommersant”, the statements the Minister made were followed by a meeting of Summa Group with the leadership of the country in which the question about the guaranteed flows of 20 million tons of crude annually was raised. The oil companies showed no interest in changing the directions of exports and they doubt whether it would be possible to establish Russian grade in a short time, as the quality will differ.

Vitaly Kryukov, Director of the Small Letters, believes that in the current economic conditions and taking into account changes of crude supply routes towards the West, in the Asian region, it will be difficult for Summa to implement the project in Rotterdam. Of course, he said, the idea of making Urals benchmark is very attractive, there are enough of preconditions: exports grow and exceed the volume of Brent, production of which falls. Vitaly Kryukov said it was not the right time for the moment, the European market is not yet ready for this and Russian majors are not able to guarantee the shipments, as it is more profitable for them to work with their traders.