Details: Belarus, Kazakhstan ready to sign oil agreement
<p> MINSK, Dec 2 - PrimePress. More than a year ago, in October 2019, Belneftekhim and the Ministry of Energy of Kazakhstan agreed on the text of an intergovernmental agreement on trade and economic cooperation in the supply of oil and petroleum products to Belarus. In January 2020, Belarusian president Alexander Lukashenko issued Ordinance #27 authorising the government to negotiate the draft agreement and sign it. In November 2020 the Government of Kazakhstan approved the draft agreement and submitted it for public discussion. </p> <p> </p> <p> The draft agreement states that oil and petroleum products are supplied fr om Kazakhstan to Belarus without export customs duties to meet the needs of Belarus’ domestic market. This means that oil products produced by Belarusian refineries from Kazakh raw materials are also not subject to export duties outside the Belarusian customs territory. </p> <p> </p> <p> There are exceptions for the export of fuel oil, calcined and non-calcined petroleum coke only. In other words, it will be possible to export these products produced from Kazakhstani raw materials. </p> <p> </p> <p> The official position of the Kazakh authorities with regard to duty-free supplies of crude oil and petroleum products to Belarus has always been consistent: such supplies are possible only if the Belarusian authorities exclude the re-export of raw materials and petroleum products derived from Kazakh crude oil. </p> <p> </p> <p> If Minsk violates its obligations, the Kazakh party reserves the right to suspend supplies of crude oil and petroleum products to Belarus. </p> <p> </p> <p> The document will be signed after the parties have completed the necessary domestic procedures. The agreement will remain in force until December 31, 2024. </p> <p> </p> <p> The draft agreement does not specify the volume of expected deliveries, as well as their price and logistics terms. These parameters will be discussed when entering into direct contracts with oil companies in Kazakhstan. </p> <p> </p> <p> Both price and logistics to be looked at </p> <p> </p> <p> For at least the last 10 years Belarus has been trying to supply Kazakh oil to Belarusian refineries, which could be an alternative to Russian oil. However, Kazakhstan was ready to supply oil only with the export duty, which made it economically impractical to buy it. </p> <p> </p> <p> It was not until 2019 that it became possible to agree on a duty-free supply of oil, under guarantees that Belarus would not re-export it. </p> <p> </p> <p> During the negotiations in 2019, the parties talked about purchasing between 1 million and 3.5 million tonnes of oil and petroleum products per year. Belarus also indicated its interest in the supply of refined products such as gasoil and fuel oil. </p> <p> </p> <p> Belarus will have to negotiate the supply of Kazakh oil via the Druzhba pipeline with a third party - Russia. Given the drop in Russian oil supplies to Europe amidst the pandemic, there is idle capacity in the Transneft pipeline system, but in any case this will require additional arrangements. </p> <p> </p> <p> Kazakh oil can be supplied to Belarus not only via Druzhba, but also via the expansion of the Caspian Pipeline Consortium and via Novorossiysk, wh ere Azerbaijani oil was delivered to the Mozyr Refinery via the Odessa-Brody pipeline in 2020. </p> <p> </p> <p> Thus, there are technical opportunities to supply Kazakh oil to Belarus. The main thing is to make sure the price is competitive. </p> <p> </p> <p> Kazakh companies are unlikely to lose a potential profit, so they will be guided by world prices when selling oil to Belarus. In addition, transporting oil from Kazakhstan to Belarus may be more expensive compared to the logistics of Russian oil deliveries. </p> <p> </p> <p> “Everything is determined by the price that oil from Kazakhstan will cost our allies. It is illogical to supply it at domestic prices,” says Sergei Smirnov, a Kazakhstani energy market expert. </p> <p> </p> <p> The expert believes that swap schemes with the participation of Russia may be used to organize the supply of Kazakh oil to Belarus. “That is, within the framework of agreements between Minsk and Nur-Sultan, Russia can supply a certain volume of its oil through the pipeline to Belarus, and Kazakhstan will transfer a similar amount of oil to China in terms of value against Russian exports to China,” Smirnov said. </p> <p> </p> <p> Crude oil processing looks promising </p> <p> </p> <p> More promising for the Belarusian refineries may be the supply of Kazakhstani oil raw materials for the production of those types of products, the export of which will not be prohibited. </p> <p> </p> <p> Firstly, in this case Transneft will not have to ask to let Kazakhstan’s crude oil into the ‘pipe’ - it is supplied by rail. Secondly, it may happen that once the tax reform in Russia’s oil industry has been completed, it will be more profitable for the Belarusian refineries to increase processing of crude oil rather than oil. </p> <p> </p> <p> In particular, in 2021, Naftan plans to complete a large-scale investment project to build a slow coking facility, which will enable the refinery to produce a new product - petroleum coke. It is planned to produce around 460,000 tonnes per year, all of which is expected to be exported and the agreement with Kazakhstan will allow for this. </p> <p> </p> <p> In 2019, Naftan, together with BelOil (a state oil trader), considered opportunities to sell petroleum coke to North-Western Europe, the USA, India and Brazil with transhipment via the Baltic States. Negotiations on the purchase and processing of petroleum coke were held in advance with the American companies Oxbow Energy Solutions, Rain Carbon Inc., Tricon and the Swiss company Suek AG, who expressed their readiness to cooperate with Naftan in terms of purchasing petroleum coke. </p> <p> </p> <p> The signing of the inter-legal agreement with Kazakhstan opens up great opportunities for Belarus in terms of petroleum coke exports, given the agreements on the possibility of processing Kazakh raw materials at Belarusian refineries and re-export of petroleum coke. </p> <p> </p> <p> However, the political crisis in Belarus and the forthcoming new economic sanctions against Belarus by Europe and the United States may negate these promising projects. </p> <p> </p> <p> Thus, Belarus will soon be able to buy oil and petroleum products from Kazakhstan without paying export duties. Refining Kazakhstan's crude oil may bring certain dividends to Belarusian refineries, but only if Europe and the USA do not accept a package of economic sanctions against Belarus due to the political crisis, including a ban on the import of Belarusian oil products and petrochemicals. End </p>
2020-12-03
Primepress
MINSK, Dec 2 - PrimePress. More than a year ago, in October 2019, Belneftekhim and the Ministry of Energy of Kazakhstan agreed on the text of an intergovernmental agreement on trade and economic cooperation in the supply of oil and petroleum products to Belarus. In January 2020, Belarusian president Alexander Lukashenko issued Ordinance #27 authorising the government to negotiate the draft agreement and sign it. In November 2020 the Government of Kazakhstan approved the draft agreement and submitted it for public discussion.
The draft agreement states that oil and petroleum products are supplied fr om Kazakhstan to Belarus without export customs duties to meet the needs of Belarus’ domestic market. This means that oil products produced by Belarusian refineries from Kazakh raw materials are also not subject to export duties outside the Belarusian customs territory.
There are exceptions for the export of fuel oil, calcined and non-calcined petroleum coke only. In other words, it will be possible to export these products produced from Kazakhstani raw materials.
The official position of the Kazakh authorities with regard to duty-free supplies of crude oil and petroleum products to Belarus has always been consistent: such supplies are possible only if the Belarusian authorities exclude the re-export of raw materials and petroleum products derived from Kazakh crude oil.
If Minsk violates its obligations, the Kazakh party reserves the right to suspend supplies of crude oil and petroleum products to Belarus.
The document will be signed after the parties have completed the necessary domestic procedures. The agreement will remain in force until December 31, 2024.
The draft agreement does not specify the volume of expected deliveries, as well as their price and logistics terms. These parameters will be discussed when entering into direct contracts with oil companies in Kazakhstan.
Both price and logistics to be looked at
For at least the last 10 years Belarus has been trying to supply Kazakh oil to Belarusian refineries, which could be an alternative to Russian oil. However, Kazakhstan was ready to supply oil only with the export duty, which made it economically impractical to buy it.
It was not until 2019 that it became possible to agree on a duty-free supply of oil, under guarantees that Belarus would not re-export it.
During the negotiations in 2019, the parties talked about purchasing between 1 million and 3.5 million tonnes of oil and petroleum products per year. Belarus also indicated its interest in the supply of refined products such as gasoil and fuel oil.
Belarus will have to negotiate the supply of Kazakh oil via the Druzhba pipeline with a third party - Russia. Given the drop in Russian oil supplies to Europe amidst the pandemic, there is idle capacity in the Transneft pipeline system, but in any case this will require additional arrangements.
Kazakh oil can be supplied to Belarus not only via Druzhba, but also via the expansion of the Caspian Pipeline Consortium and via Novorossiysk, wh ere Azerbaijani oil was delivered to the Mozyr Refinery via the Odessa-Brody pipeline in 2020.
Thus, there are technical opportunities to supply Kazakh oil to Belarus. The main thing is to make sure the price is competitive.
Kazakh companies are unlikely to lose a potential profit, so they will be guided by world prices when selling oil to Belarus. In addition, transporting oil from Kazakhstan to Belarus may be more expensive compared to the logistics of Russian oil deliveries.
“Everything is determined by the price that oil from Kazakhstan will cost our allies. It is illogical to supply it at domestic prices,” says Sergei Smirnov, a Kazakhstani energy market expert.
The expert believes that swap schemes with the participation of Russia may be used to organize the supply of Kazakh oil to Belarus. “That is, within the framework of agreements between Minsk and Nur-Sultan, Russia can supply a certain volume of its oil through the pipeline to Belarus, and Kazakhstan will transfer a similar amount of oil to China in terms of value against Russian exports to China,” Smirnov said.
Crude oil processing looks promising
More promising for the Belarusian refineries may be the supply of Kazakhstani oil raw materials for the production of those types of products, the export of which will not be prohibited.
Firstly, in this case Transneft will not have to ask to let Kazakhstan’s crude oil into the ‘pipe’ - it is supplied by rail. Secondly, it may happen that once the tax reform in Russia’s oil industry has been completed, it will be more profitable for the Belarusian refineries to increase processing of crude oil rather than oil.
In particular, in 2021, Naftan plans to complete a large-scale investment project to build a slow coking facility, which will enable the refinery to produce a new product - petroleum coke. It is planned to produce around 460,000 tonnes per year, all of which is expected to be exported and the agreement with Kazakhstan will allow for this.
In 2019, Naftan, together with BelOil (a state oil trader), considered opportunities to sell petroleum coke to North-Western Europe, the USA, India and Brazil with transhipment via the Baltic States. Negotiations on the purchase and processing of petroleum coke were held in advance with the American companies Oxbow Energy Solutions, Rain Carbon Inc., Tricon and the Swiss company Suek AG, who expressed their readiness to cooperate with Naftan in terms of purchasing petroleum coke.
The signing of the inter-legal agreement with Kazakhstan opens up great opportunities for Belarus in terms of petroleum coke exports, given the agreements on the possibility of processing Kazakh raw materials at Belarusian refineries and re-export of petroleum coke.
However, the political crisis in Belarus and the forthcoming new economic sanctions against Belarus by Europe and the United States may negate these promising projects.
Thus, Belarus will soon be able to buy oil and petroleum products from Kazakhstan without paying export duties. Refining Kazakhstan's crude oil may bring certain dividends to Belarusian refineries, but only if Europe and the USA do not accept a package of economic sanctions against Belarus due to the political crisis, including a ban on the import of Belarusian oil products and petrochemicals. End