European refiners scramble after Druzhba Pipeline shuts


When crude oil containing organic chloride was pumped into a pipeline in the Russian town of Samara, few people would’ve imagined the far-reaching consequences.

Oil companies across central and eastern Europe rushed to halt pipeline shipments to avoid refinery damages and find alternative sources of supply.

Governments released oil from storage reserved for emergencies.

Officials from Poland, Russia, Belarus and Ukraine gathered in Mink to discuss ways to solve the problem.

Vladimir Putin lamented the incident had damaged the country’s reputation, a rare public admission by the Russian president, but not before he fired Moscow’s ambassador to Belarus.

And the news pushed crude futures to fresh 2019 highs and caused Urals differentials to strengthen to all-time highs.

Why all the reaction? Consider the pipeline involved. The Druzhba Pipeline carries 1 million barrels per day. That’s equal to one of every four barrels being exported from Russia.

When the pipeline leaves Russia and crosses into Belarus it branches into a northern section (Poland, Germany) and a southern section, which enters Ukraine and then splits into two branches (Hungary, Croatia) and (Slovakia, Czech Republic).


Illustration credit: Andrew Morse/Ursa

With so many countries relying on its fuel, the Druzbha Pipeline is a critical piece of energy infrastructure.

Yet the discovery of contaminated crude coming out of the pipeline forced many of these countries to stop imports.

The focus then shifted to whether refineries had enough crude in storage to keep running until the issue gets resolved or alternative supplies found.

There are also two major storage terminals in the Druzbha system found in Gdansk, Poland and Omisalj, Croatia.

Ursa measures storage at both sites on a weekly basis using synthetic aperture radar (SAR).

Our latest data showed stocks fell at Gdansk and Omisalj, but remain relatively well-supplied as a percentage of capacity (see graph below).

Refiners are also snapping up Russian Urals at the Russian Baltic port of Primorsk. The nearby port of Ust-Luga has dealt with contamination problems not expected to improve until May 7.

We also measured a draw in stocks at Primorsk, according to our latest data, pulling inventories below 50% of capacity.

Between the weeks that ended April 25 and May 2, stocks declined by 20% in Primorsk and Omisalj, and by 5.6% in Gdansk.


Source: Ursa

When will the pipeline get back to normal? There have been reports that clean fuel has already arrived in Belarus via the Druzhba Pipeline, but it will take some more time before flows resume to pre-stoppage levels.

Will refiners be forced to cut runs? How much further will stocks fall at refineries and ports? If needed, where else will refiners look to substitute Urals?

Whatever the outcome, we’ll continue to monitor these developments for our clients using data derived from SAR intelligence.

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