The main and most highly profitable Ukrainian market for the export of Belarusian oil products light can in a short time surprises. Surprise with the plus sign – increase the supply of diesel fuel in connection with the new possibility of transporting through the pipe, with a minus sign – the imposition of duties on Belarusian gasoline.
Belarusian gasoline “energized”
In recent years, Ukraine has tried several times to restrict the import of motor fuels from Belarus.
In particular, in March 2018, the largest Ukrainian producer of gasoline — “Ukrtatnafta” initiated the introduction of quotas and duties on Russian and Belarusian gasoline and diesel fuel. Thus, the company is required to impose quotas on duty-free imports of gasoline and diesel fuel from Russia and Belarus as a single source at 30% of the Ukrainian market. But the Interdepartmental Commission rejected the company in the investigation, for the sentence “Ukrtatnafta” has created serious problems for the domestic market.
In the fall of 2018, the company once again sent a letter, in which this time asked to enter the 12 percent duty only on the Belarusian gasoline — the main competitor of “Ukrtatnafta” on the domestic market. The fact that gasoline is a very problematic position for all providers, as in the Ukrainian market there is a surplus. On the future of this treatment were not reported.
However, this question from the agenda of the left. The Chairman of the Board of PJSC “Ukrtatnafta” Pavel Ovcharenko in an interview with enkorr recently noted that the company does not waive its previously initiated offers to impose duties on the import of gasoline from Belarus. “Remains on the agenda and the question of duties on Belarusian petrol. But honestly, I believe it is weak. Populism was and always will be. Will always say that the introduction of fees will lead to a rise in price of petroleum products. Although we always stressed that let’s restrict Belarusians and Russians, we’re not against the free market, not against Lithuania and other European refineries,” said P. Ovcharenko in September 2019.
According to him, the Belarusian producers are uncompetitive advantage on the Ukrainian market at $ 100 per ton due to the duty-free import of Russian oil. “We are still thinking how do we win the Belarusians market for processing 3.5 million tons of oil, of which get over 1 million tons of gasoline,” said P. Ovcharenko.
Difficulties with the implementation of gasoline are one of the obstacles to increasing the volume of processing of the Kremenchug refinery. To export surplus gasoline, according to the head of the company, is not economically feasible because of the large logistic costs. “We are not a factory, which is located in the port below the oil there to get the product back to send. Should we spend the money on shipping of raw materials and to send for export. So the export is not for us. If Kremenchug was in Odessa, I would not even worried about that gasoline: loaded on a tanker and sent. We have only the domestic market, where we compete with Belarus”, — explained the situation the head of the Kremenchug refinery.
However, despite these challenges, the share of Ukrainian producers in the balance of the Ukrainian market of gasoline in 2018 increased to 42.9% from 40% in 2017 and 8 months of 2019, it has already reached 46.9 percent.
At the same time, the share of Belarusian gasoline on the Ukrainian market reduced. Director of “Consulting group a-95” (Kiev) Sergey Kuiun notes that the import of gasoline from Belarus in the first half of 2019 has decreased by 25% to 315 thousand tons in comparison with the same period of 2018. The reason is that the largest consumers of Belarusian gasoline, and this company OKKO, WOG, AMIC, went to the Lithuanian producer “Orlen Lietuva”, having increased its shipments by 79%. In the end, the share of Belarusian gasoline in the balance of the Ukrainian market in the first half decreased from 44% to 34%.
The expert suggests that in the future, “Ukrtatnafta” will increase the processing, but it may introduce restrictive measures in respect of the supply of gasoline from Belarus. The fact that the Ukrainian technological scheme of the plant provides an increased selection of gasoline, whose consumption is falling and, consequently, the implementation is problematic.
In turn, CJSC “Belarusian oil company” (BOC, the special exporter of Belarusian oil products) note that the reduced consumption of gasoline in Ukraine will continue by replacing his car with gas. In recent years gas consumption in Ukraine is growing annually by 10-15%. For this reason, there was a slight decrease in sales volume of BNK shares on the market of Ukraine. “The objective factor is the fact that Ukraine is a highly competitive market where participants share interesting, others – the price,” said the BOC.
For reference: at the end of 2017, the market for gasoline in Ukraine decreased by 8.6% to 2,015 million tons in 2018, he fell 4.6% to 1,921 million tons. The main reason was the increase in the consumption of liquefied gas. This market from 2015 to 2018 rose by half — to 1.73 million tons and continues to grow.
Competitive advantage for Belarusian diesel fuel
The share of Belarusian diesel fuel on the Ukrainian market in recent years has decreased due to the fact that it could not compete with the Russian diesel fuel, the lion’s share of which was delivered to Ukraine through the pipe.
As a result, in 2018 the share of BOC in the balance of the Ukrainian market of diesel has dropped from 43% to 30%. This volume replaced the supply of Russian gas, whose share increased from 28% to 39%. In the first half of 2019 the supply of Russian fuel to the Ukrainian market grew by 19%, while the Belarusian supplies remained at last year’s level.
Meanwhile, after the completion of the modernization in 2020, the Belarusian refineries will increase production of light petroleum products, while exports of diesel fuel will grow by about 3 million tons. This is a serious challenge for the BOC, because the company needs to sell this fuel to neighboring markets with high margins. That’s why BOC is so important to strengthen its position in highly liquid Ukrainian market.
In recent times, there are two factors that can play into the hands of Belarusians. In March 2019, the Antimonopoly Committee of Ukraine has allowed the Belarusian company Neftebitumen plant, to purchase a share in the authorized capital of the Ukrainian company “Precarpathians”, exploiting the section of the pipelines “Samara -West direction”. Now the owner of a 51% stake in the Belarusian company Neftebitumen plant, owned by the Belarusian oil-trader “Interservice”, the ultimate beneficiary of which is a major Belarusian businessman Nikolai Vorobei.
“Precarpathians” operates part of the pipeline “Samara–West direction” with a length of about 1.1 thousand km, designed for pumping diesel fuel from Russia and Belarus for domestic needs of Ukraine and for transit to Europe, particularly in Hungary. The design capacity of the mainline — 3.5 million tons per year.
Meanwhile, it is worth Recalling that 15 years ago Belarus defended the right of ownership in the Belarusian part of the pipeline “Samara–West direction”, following Ukraine and Hungary.
After the collapse of the Union of Belarus considered the pipeline of their property. On the basis of the Bishkek agreement of 1991 on the division of property of the former USSR Minsk claimed their rights on oil pipelines passing through the territory of the country. How many battles had to withstand the Belarusian officials in an effort to defend their right to the property complex of the enterprise “Zapad-Transnefteprodukt”!
In may 2000, the Supreme economic court of Belarus canceled the registration of the enterprise “Zapad-Transnefteprodukt” (the affiliated structure of the Russian AK “Transnefteprodukt”), and at the end of 2003 on taxes and levies Mozyr in this regard filed a lawsuit to recover taxes and penalties from the company in the amount of 13 million dollars.
Russia also appealed to the fact that according to the Bishkek agreement the former republics departed the property of the USSR, not of the RSFSR, which supposedly at that time belonged owning the Belarusian pipeline “Transnefteprodukt”. Conflict of interest closest allies was loud, and its orbit was involved, the presidents of Belarus and Russia.
In order not to lose this pipeline, the Belarusian authorities even invited the Russians to establish a joint venture on the basis of “Zapad-Transnefteprodukt” with an equal share of the share capital 50:50. Moreover, the Belarusian government had intended as his share to make 19 billion roubles (price adapted to the carrying value of pipelines on the territory of Belarus). However, the Russian side did not agree.
In turn, Russia, to make more tractable the obstinate ally to come to win-win “the argument” — has reduced the supply of gas and oil to Belarus. In the end, Minsk had to give.In June 2004, was put an end to a protracted dispute between Russia and Belarus on material supplies of the Belarusian part of the pipeline Samara–West direction, following Ukraine and Hungary. Minsk acknowledged that this pipeline is a Russian property.
The transit of Russian oil through the territory of Belarus at that time was about 9.5 million tons per year: nearly 65% of transit of oil products goes to Latvia, the rest in Ukraine. Later, however, the volume of transit decreased significantly. It has occurred including because of the commissioning of the new Russian oil pipeline “the North”, which, in fact, is an alternative to the transit of Russian gas through the “Zapad-Transnefteproduct”.
Belarusian diesel fuel already tested the “pipe”
Buying a Belarusian businessman in the share of Ukrainian pipeline allows BOC to strengthen its position in the Ukrainian market of diesel fuel. Note that the last time the Mozyr diesel fuel was delivered to Ukraine by “Precarpathians” in 2001.
In April 2019 N. Sparrow said that soon the diesel fuel made by Mozyr oil refinery will go to Ukraine on the pipeline. Six months later, on September 12 linear production-dispatching station (LPDS) “Novohrad-Volyns’kyi” pipeline “Precarpathians” took delivery of the tanks in the test batch of diesel fuel production Mozyr oil refinery. The main objective of the test pumping was the preservation of the quality of the Mozyr diesel fuel. “The Belarusian fuel has distinctive characteristics, in particular, lower density and a different color. From a commercial point of view is extremely important and our task is to ensure the preservation of its quality”, — said the Director of LPDS “Novohrad-Volyns’kyi” Andriy Martynyuk portal enkorr.
According to him, the advantage of pipeline deliveries, in contrast to the transportation of fuel by rail, is, first and foremost, the absence of long approval procedures, as well as issues with downtimes of the wagons and the scarcity of rolling stock, which have recently significantly deteriorated.
However, plans for further upgrading of Belarusian and Russian product to the terminal in Novograd-Volynsky A. Martynyuk refused to comment, redirecting these issues are resource holders.
TopCoder for Mozyr diesel
The second factor, which stimulate the growth of supplies of Belarusian diesel fuel in Ukraine — restrictive measures imposed by the Kyiv against pipeline supplies of Russian diesel fuel.
Ukraine 1 August 2019 has introduced a special duty on the import of diesel fuel of Russian production pipeline “Precarpathians” in the amount of 3.75% of the customs value of the goods (about $ 25 per tonne) is the primary source of fuel imports, which accounted for over one third of deliveries to the Ukrainian market. From August 1, the supply of Russian diesel fuel via this “tube” is suspended. From October 1 the fee will increase to 4%.
As a result, according to “Consulting group A-95” (Ukraine), the total supply of diesel fuel on the Ukrainian market, including domestic production in August 2019 decreased by 14% in comparison with August 2018 until 545,8 thousand tons. Russian diesel fuel in August had entered the Ukraine through the pipeline terminal in Gomel (Belarus) from the company “Rosneft”, just had a set of 52.2 thousand tons, 6 thousand tons — by rail from “Orcompleteness”.
The lost volumes of the Russian diesel fuel were offset by increasing supplies from other sources, including from Belarus. The BOC has increased the supply of diesel fuel in Ukraine in August by 32.4% in comparison with August of 2018 to 306.6 thousand tons. Delivery from Lithuania increased by 33.5% in comparison with August 2018 to 47.6 thousand tonnes of sea imports rose 60% to 60.9 thousand tonnes, domestic production in August increased by 6.6% to 77.7 thousand tonnes.
The introduction of duties on Russian fuel, and the opportunity to supply diesel fuel to Ukraine by pipeline transport will automatically increase the attractiveness of Belarusian fuel on the very close and high-margin market. According to statements of management of BOC, the company has the resources to increase supply by almost 30% from the current level or 50 thousand tons of diesel fuel per month.
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