MOSCOW. (Igor Tomberg for RIA Novosti) - On February 5, the Belarusian Economics Ministry published regulations on raising tariffs on oil transit through the republic's trunk pipelines.
Under the circumstances, every time Minsk announces the introduction of extra transit fees Moscow feels more inclined to build an export pipeline bypassing Belarus. But should Russia launch the multibillion dollar project?
Russian oil transit to Europe will become 33% more expensive on average. As of February 15, 2007, the tariff on oil transit along the Unecha-Mozyr-Adamova Zastava route (to Poland and Germany) for the Gomeltransneft Druzhba company will grow by 34.6% to $3.5 (excluding the VAT) per metric ton per 100 km. The tariff will increase by 31.6% to $1.5 for the Unecha-Mozyr-Brody route to Hungary, Slovakia, the Czech Republic and Ukraine. Oil producers will have to pay about $3 to pump oil through Unecha and Novopolotsk to Mazeikiu Nafta and Ventspils Nafta in Lithuania along the Baltic route, which is currently idle because of repairs on the Russian sector of the Druzhba pipeline.
The Belarusian Economics Ministry said in a statement that the above tariffs had been calculated to match the average market tariff on oil transit through Transneft's system via Russia, which is $0.6 per metric ton per 100 km.
The ministry said that the decision to raise oil transit tariffs was intended as compensation for higher oil pumping costs, which followed an increase in energy prices. The tariffs on Russian oil transit via Belarus were introduced on January 1, 1996, and have not been reviewed ever since.
According to Transneft's managers, the company has not yet received any notification of a tariff increase from its Belarusian colleagues. However, the company's CEO, Semyon Vainshtok, has announced that they had decided to build a new leg of the pipeline with a capacity of 50 million metric tons a year from the Russian-Belarusian border through Velikiye Luki to Primorsk. "We have made a decision and will develop the Baltic pipeline system along the Unecha route (on the Belarusian border) to the Primorsk port," he said.
The port's capacity will be increased to 50 million metric tons of oil. "Of course this is very expensive," Vainshtok said. The pipeline's new leg should be 1,000 km long, and the project's costs have been tentatively estimated at $2.5 billion. Exploration will start on February 12.
Minsk's frequent statements on the introduction of extra tariffs on oil and gas transit through Belarus increase the rational for building an export pipeline bypassing the republic. Transneft evidently intends to honor Vladimir Putin's instructions to reduce the transit risks accompanying Russian oil exports and emanating from Lukashenko's regime, which he gave at his news conference on February 1. However, it would be wise to assess the risks first.
It is not hard to estimate the losses resulting from higher tariffs. An official from the Belarusian Economics Ministry said that the weighted average price of Russian oil transit through the republic would be $0.6 per metric ton per 100 km against the previous price of $0.41. The tariff is higher in adjacent countries. Poland's tariff on oil transit to Germany is $0.9, and the Ukrainian tariff on oil transit to Hungary and Slovakia is $0.89. The tariff on Kazakh oil transit through Russia is $0.73.
Belarus annually transports up to 80 million metric tons of Russian oil. Russian producers have so far been spending about $166 million a year on oil transit via Belarus, and will now have to pay $224 million. As a result, oil export will remain profitable for Russian producers. The extra costs are unlikely to affect them considering the current oil prices. However, far from everyone would like to switch from the traditional ground transportation through the Druzhba pipeline to sea shipments. The fuel prices for European consumers will not be increased either. And although Belarusian oil transit tariffs will grow by 33%, they will still be lower than in the neighboring countries. Adjusting prices to the weighted average level is normal practice.
This raises the question of whether an ordinary event that would not have been mentioned in non-profile publications before is worth launching a multibillion dollar project to build an alternative pipeline. Russian President Vladimir Putin set the task of reducing transit risks for hydrocarbon exports. However, earlier he had also made the decision to export 30% of fuel eastwards, which necessitates an increase in output in eastern Russia and the construction of a pipeline network. This will require huge sums, which would be better spent on finding alternative markets to solve the problem of transit countries.
The decision to bury billions of dollars in the ground because of the political tensions with Minsk is corporate, and is not in Russia's interests, all the more so since there is a surplus of oil pipeline capacities in the western direction and a shortage in the east, Vainshtok said. When eastern pipelines are built, there may be no oil to pump through them, and it may become necessary to use west Siberian oil. The strategy of oil and gas supplies to foreign markets should be changed. However, the ambition to concentrate resources for a turn to the East has not been strong enough, which makes the turning of oil and gas transit routes eastwards, a favorite issue among journalists and analysts, idle gossip.
Igor Tomberg, Ph.D., leading research fellow at the Center for Energy Studies at the Institute of World Economy and International Relations, Russian Academy of Sciences.
The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti.
