Russia faces fuel crisis after railway wagon ban

Reuters News
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Posted: May 18, 2012 11:48 PM
Russia faces fuel crisis after railway wagon ban

By Alexei Anishchuk and Natalia Chumakova

MOSCOW (Reuters) - Russia, the world's largest oil producer, faces domestic fuel shortages after authorities restricted the transport of crude oil by rail, forcing several refiners to cut production, industry and market sources said.

Analysts estimate that output of a quarter or more of refined oil products could be lost, threatening a repeat of last year's fuel shortages following Russian leader Vladimir Putin's order to oil companies to curb pump prices.

However, it is unlikely to dent crude exports, as Russia uses pipelines as its main method of transporting oil abroad.

Russia's transportation safety watchdog has banned the use of rail wagons designed to handle light oil products to ship crude and heavy fuel oil, following several rail accidents.

That has cut the number of wagons in operation, several oil refineries said, curbing supplies and forcing them to cut runs.

Mid-size producer Orsknefteorgsintez, said its heavy oil shipments have slumped by almost a half.

"We will only be able to function for 10 days in this mode," a company official said. "We hope the situation will be resolved by then."

The Khabarovsk refinery, operated by Alliance, said on Wednesday it reduced throughput by half following the ban.

"As a result (of the decision) oil refinery declined from 11,200-11,300 metric tonnes (12,346-12,456 tons) per day to 5,100," a spokesman said.

Representatives of several other refineries have expressed concerns over the ban, but would not comment on the record.

A spokesman for Rosneft, Russia's largest crude producer, said that the company has written to Acting Transportation Minister Igor Levitin asking him to postpone the ban until August 1.

The ban was set on May 5, according to a document posted on the watchdog's website www.rostransnadzor.ru.

Rostransnadzor, which is part of the ministry, could not be reached for comment.

Russian refiners processed a total of 65.6 million tonnes of oil (5.28 million barrels per day) in the first quarter of this year, or just over half of the country's total crude output.

They produced 9.4 million tonnes of gasoline, 17.4 million tonnes of diesel fuel and 19.3 million tonnes of fuel oil during those three months, according to Energy Ministry statistics.

FAR EAST AFFECTED

The ban could take between 25-30 percent of oil products from the market, an industry expert said, affecting remote regions where refineries largely rely on railway transport.

"This (ban) is very sensitive for the Far East, where oil is supplied by railways," Grigory Sergiyenko, executive director of Russian fuel union, an industry group of mid-size oil producers, told Reuters by phone.

He said it won't affect European Russia, where refineries are plugged into the pipeline system.

"On the one hand they (the government) try to create favorable conditions for business, but on the other they ... tighten administrative regulation," he said. "I don't know how far they'll go this time, but maybe (they want refineries) to stop operating at all now."

Lukoil, Gazpromneft, TNK-BP and Bashneft also expressed their concerns over the ban to the ministry, Vedomosti business daily reported on Thursday, citing the companies.

Russia's No.3 crude producer TNK-BP warned it may even cut oil output if the ban stays, Kommersant daily newspaper said on Thursday, citing Executive Vice President German Khan's letter to Levitin.

Last year motorists in Russia's remote Siberian region of Altai queued at gas stations, after an order by Putin to curb domestic pump prices led oil firms to increase export volumes.

(Writing by Alexei Anishchuk; Editing by Douglas Busvine and Hans-Juergen Peters)