The Company is also going to establish the Urals Heavy brand oil and to export annually some 30 mln t of it via the port of Ust-Luga.

Diesel based patriotism

The strategy of Transneft implies further shifting of Russian oil products from the Baltic states to the ports of Russia. Vladimir Nazarov, Deputy Vice-President of Transneft JSC – Director of the Department for planning and control of cargo flows, expects oil products exports via the port of Ventspils (Latvia) to reduce over 2 times to 2 mln t in 2016. According to him, 15 mln t of oil products will be exported via port Primorsk (Leningrad Region). Moreover, by 2020 Transneft is going to export 25 mln t of oil products per year under Sever project.

In 2015, the ports of the Baltic states transshipped 17.9 mln t of Russian oil products including 4.2 mln t of diesel fuel delivered by pipelines (in 2016 it will make only 2 mln t), 4.9 mln t of diesel fuel delivered by railway, 3.8 mln t of fuel oil, 2.4 mln t of vacuum gasoil, 1.5 mln t of naphta, 0.6 mln t of petrol and 0.5 mln t of furnace oil.

All in all, exports of diesel fuel totaled 23.5 mln t including 14.45 mln t via port Primorsk, 4.2 mln t via Ventspils, 2.34 mln t via Riga,  1.22 mln t via Novorossiysk. Exports by railway transport  totaled 6.5 mln t including 1.02 mln t via Riga and 0.64 mln t via Ventspils.

“Primorsk is the main point for pipelines … As for railways, the volumes going to the Baltic states are preserved. It is necessary to make it profitable for Russian producers to go to Russian ports. When pipeline supplies are reduced we see those volumes taken over by railways towards the foreign countries,” said Transneft representative.

Transneft is also going to build up exports of oil products via the port of Novorossiysk. Resource potential under the Company’s Yug project will make 10.9 mln t of diesel fuel per year by 2021.

It is also necessary to mention the launching of the new pipeline linking port Primorsk (Leningrad Region) with export terminal RPK-Vysotsk-Lukoil-II (Leningrad Region). Its test run commenced in February 2016 and now it is fully operational. The 2016 resource base of the pipeline is 1.2 mln t, its annual capacity is 1.5 mln t with the capacity of expansion to 3 mln t and later to 5 mln t per year.

Meanwhile some analysts say it is not good to focus that much on export of diesel fuel to Europe as the peak of dieselisation in this region is over and the recent Volkswagen diesel emissions scandal confirms it. The forecasts say that Europe will gradually shift from diesel fuel to alternative sources of energy and increase the number of electric cars.

Sulphur smell 

Transneft is going to produce export brands of oil with direct quotation and status of global price indicator (benchmark). Saint-Petersburg International Mercantile Exchange (SPIMEX) with the assistance of Transneft are going to launch Urals crude as Russian oil benchmark from November 2016.

As of today, Russia exports ESPO via port Kozmino for Japan, APR countries and China; Siberian Light crude – via Novorossiysk; Urals – via Novorossiysk and Primorsk ports as well as by Druzhba pipeline to the EU countries.

Transneft says the new brand will be developed through excluding high-sulphur oil produced in the Urals-Volga region from the Urals oil. The new brand will have sulphur content of 2.3% and will be exported via Ust-Luga in the amount of some some 30 mln t per year. The approval is expected from the governmental now. The new brand oil will then be developed within about a year.

Taking into consideration that withdrawal of high-sulphur from the Urals brand has opponents, the last word has not yet been said on this matter.