Chlorine-flavored friendship: main lessons from the fuel crisis 05/17/2019 14:58:01. Total views 1652. Views today — 0.

The incident with massive pollution of Russian oil with organochlorine impurities showed the unwillingness of the Ukrainian authorities to respond to such challenges.

This time, they got off relatively cheap: a temporary stop of oil refineries in neighboring Belarus cost Ukrainian motorists "extra" 1-1.5 hryvnias per liter at gas stations.

But quite soon, we can expect a new fuel crisis with more serious consequences for the country.

Back at the bottom of the oil ladder

So, reports of the suspension of Russian oil supplies to Belarus via the Druzhba pipeline appeared on April 19. Later, similar decisions were made by Slovakia, Poland, Hungary and Ukraine.

The reason is massive pollution of oil with chlorine-containing compounds disrupting refinery equipment. In total, about 5 million tons of unconditioned oil accumulated in pipelines of 5 countries.

The history of its getting into the export pipeline should be primarily interested by the Russians themselves – after all, they will be subject to claims for the supply of products of inadequate quality and damage.

In the Ukrainian case, it is small - about €1 million - from the temporary cessation of oil pumping to Hungary, Slovakia and the Czech Republic.

According to the state-owned Ukrtransnafta, which manages the main oil pipelines, our oil transportation system received no direct harm.

Deliveries of the Russian resource to the Ukrainian oil refineries have stopped since 2011. As for the Belarusian oil refineries in Mozyr and Novopolotsk, "clean" oil has gone there since May 2.

Price tags at Ukrainian gas stations responded to these events as follows.

Ценники на украинских АЗС отреагировали на эти события следующим образом.

Average prices at Ukrainian gas stations, UAH/l

Fuel type May 19 May 6
30.00 31.48
А-95 28.82 30.35
А-92 27.76 29.33
DF 28.37 29.93

The Investigative Committee of the Russian Federation opened a criminal case on the fact of deliberate oil pollution, the source of which was site of the private company Samaratransneft-Terminal.

What it was – sabotage, negligence, or something else, is not important for us. More importantly, the Ukrainian authorities did not have an effective lever to respond to force majeure.

In L.Kuchma's times, the oil refining industry of Ukraine, inherited from the "criminal Soviet Union", was successfully divided between the oligarchs. As a result, today only the Kremenchuk Refinery operates in the country, controlled by the Privat group of I.Kolomoyskyi.

The state has the Shebelinsky gas processing plant (GPP), which produces gasoline. But this is a by-product for it and the share of the state-owned enterprise is too small to influence the prices at the gas stations.

At the end of 2018, ShebGPP reduced gasoline production by 2.4% to 130.6 thousand tons. This is 6.8% of the total annual consumption of gasoline in Ukraine. The indicators for diesel fuel (DF) are even more modest: 85.1 thousand tons, or 1.3% of annual consumption.

The way out would be to create a state reserve of petroleum products – as a strategically significant type of energy resources. All the developed countries have such reserves – but Ukraine does not have it for some reason. Although the corresponding bill was developed 10 years ago by the then Ministry of Fuel and Energy of Ukraine.

For all these years, none of the governments have bothered to come to grips with the resolution of this issue – which is of critical importance not only for the economy itself, but also for national security.

If the state had a strategic reserve of petroleum products, it could be used to allay panic amid reports of a halt in gasoline and diesel fuel supplies to Ukraine from Belarus.

The release of several reserve batches of fuel would not allow the gas station owners to speculate on the resulting force majeure.

And then, when the situation resolves, the strategic reserve could be replenished again. This is done in all developed countries.

Why then does such a mechanism not work in Ukraine? The answer is obvious: high-ranking government officials are involved in speculations in the oil market themselves.

In any case, there is no other logical explanation for the country's lack of state reserves for gasoline and diesel fuel, as well as for oil.

Aggressor, give the diesel fuel!

You will have to pay in full for such criminal carelessness first or last. And maybe, quite soon.

Since from June 1, new Russian sanctions against Ukraine, adopted on April 18, come into force. In accordance with them, oil and oil products are included in the list of goods, the export of which from the Russian Federation requires special permits.

On the one hand, this is not the doomsday. As already noted, the Russian oil stopped flowing to the Ukrainian oil refineries 8 years ago.

The practice of issuing special permits for sales of petroleum products in Ukraine was introduced in 2016. It was received only by the Rosneft state-owned company.

It has become the exclusive supplier for a number of Ukrainian companies, which the media associate with odious Viktor Medvedchuk.

Earlier, OstroV assumed that this was done for the financial support of representative of the Ukrainian political elite, the most pro-Russian in his views.

But what happens if suddenly V.Putin realizes that he no longer needs to "feed" V.Medvedchuk? Or just decide to test the strength of the new Ukrainian government, headed by V.Zelensky?

As follows from the infographic below, Ukraine expects nothing good in this case.

And can it be otherwise, if direct deliveries from a country with which relations are in a state of undeclared hybrid war account for more than a third of the total imports of petroleum products?

Imports of petroleum products in Ukraine for 2018 in monetary terms, according to the State Fiscal Service of Ukraine, billion $

 Belarus  Russia  Lithuania  Other countries
 2.114  2.069  0.571  0.787

Russian gasoline does not enter Ukraine, but the share of Russian diesel fuel in the market is impressive.

Total consumption of diesel fuel in Ukraine for 2018: 5.33 million tons, including imports from the Russian Federation – 2.74 million tons (51.4%)

This is, in fact, 5 years after the annexation of the Crimea and beginning of the armed conflict in the Donbass. Given that DF is fuel not only for passenger cars, but also for tanks.

Therefore, under the dominance of Russian fuel imports, the entire war in Donbass loses its meaning from a military point of view, turning into an theatrical clownery.

Since it is impossible to answer how the events of the Second World War would develop if steel for the Soviet tanks and guns were not made in the Urals, but received straight from the Thyssen and Krupp factories in Germany.

It is impossible – in view of the obvious absurdity and delusional nature of such a question. But is the fuel balance of Ukraine in this case not absurd and nonsense?

Moreover, the degree of Ukraine's dependence on Russian oil products is in fact much higher: if we consider that Belarusian refineries also work on the Russian oil.

Failed diversification

At the same time, over the 5 years of P.Poroshenko's rule, absolutely nothing was done to diversify the supply of petroleum products to Ukraine and restore its own refining.

And without this, as it was already noted, it makes no sense even to talk about the prospects for a military solution to the armed conflict in the Donbass and forceful confrontation with the Russian Federation.

Meanwhile, the task is not intractable. This is indicated by the example of neighboring Poland. The refineries located there are owned by PKN Orlen. It controls refineries in Lithuania and the Czech Republic.

Currently, PKN Orlen receives over 30% of oil stock for its refineries from Saudi Arabia, thanks to contracts signed with the state-owned Saudi Aramco Oil Co., the world's largest oil producer.

In addition, certain volumes are being purchased in Nigeria, Norway and Angola. Together they provide almost 50% of the resource for the Polish refiner.

All these countries are outside of the Russian influence, unlike Venezuela. Let us recall, deliveries from Venezuela through Ukraine were attempted by the Belarusian leader Alexander Lukashenko in 2010.

The idea failed for one simple reason: the then and current authorities of Venezuela are too dependent on the Russian Federation to quarrel with V.Putin.

That is why supplies have not begun. It is worth noting that now Saudi oil is delivered to Poland by tankers through the Suez Canal, bypassing all the Europe.

This makes logistics rather expensive, but PKN Orlen does it in order to avoid critical dependence on the Russian resource.

By the way, the Polish company could use the Ukrainian Odessa-Brody pipeline for this (after a small completion), which has been idle for many years.

The question arises: even if Poland, bypassing the entire European continent, was able to map new routes for oil and found reliable alternative sources of its supply, what prevents the Ukrainian authorities from doing the same?

Instead, they have for many years been trying to establish oil imports from Azerbaijan – with a perseverance worthy of a better use.

Indeed, Azerbaijani oil is much closer and more convenient in terms of delivery than Saudi or African one. And it has better quality than Russian. Local leader I.Aliyev does not depend on Moscow in any way. But!

The fact is that Azerbaijan has no free volumes for sale to the Ukrainian refineries, almost all the resources extracted there are contracted for many years to come.

Therefore, even despite the fact that Ukrtatnafta (UTN, manages the Kremenchuk Oil Refinery) signed a contract with the Azerbaijani state-owned company Socar at the end of 2016 for an annual supply of 1.3 million tons - it in fact imported about 960 thousand in 2017.

Although the plans were ambitious: in 2017, UTN was going to increase oil refining by 41% - and it turned out only by 8%.

Then, plans were announced for 2018 to increase the supply of Azerbaijani oil by 900 thousand tons, i.e. almost double up. But, as follows from the reported data, UTN, instead, reduced oil imports by 30.3%, to 699 thousand tons in 2018.

That is, the attempts to establish sustainable resource supplies from Azerbaijan once again broke by the harsh market realities.

Do not forget about the two oil and gas blocks – South Wadi El Mahareeth and Wadi El Mahareeth in the Eastern Desert of Egypt. The estimated resource of these blocks is more than 360 million tons of oil.

Since 2012, they have been in use by Naftogaz of Ukraine on a concession basis.

It would seem – what could be easier? Invest in geological exploration, production drilling – and pump oil, take tankers to Ukraine and refine at the same Odessa refinery, which previously belonged to a runaway Kharkiv oligarch S.Kurchenko.

The decision of the Suvorovsky District Court of Odessa on special confiscation of all property of the Odessa Refinery in favor of the state entered into force on July 21, 2017.

However, the refinery is still idle. The management of Naftogaz complains about the lack of financial resources necessary for large-scale oil production in Egypt.

This is despite the fact that the company sells gas of Ukrainian production to the population 3-4 times more expensive than its cost.

Even Russian gas is cheaper for European consumers –at the same time, Naftogaz still does not have the money for foreign investments in the right amount.

Will something change now after the thunder struck in the form of an incident with the pollution of Russian oil with organochlorine and restrictions imposed on the export of petroleum products from the Russian Federation?

Vitaliy Krymov, OstroV