October 14, 2012
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№ 9 (September 2012)

Ust-Luga Terminal Routes Russian Oil Direct to Europe

Russia’s newest oil terminal began commercial operations this week, six months after Russian President Vladimir Putin inaugurated the testing phase of the site that establishes a direct link between Russia and Europe. The new oil terminal is located at the Ust-Luga merchant seaport on the Gulf of Finland and is the final destination of the Baltic Pipeline System-2 (BTS-2).

By Ben Priddy

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BTS-2 is a north-south trunk line that is jointly owned by Transneft and Rosneftbunker. Up to 20 percent of oil transited through BTS-2 could come from Kazakhstan, according to Konstantin Khamlai, General Director of the Neva Pipeline Company that owns the Ust-Luga oil terminal.

Plans for constructing BTS-2materialized after the oil transit dispute between Russia and Belarus in 2007. The pipeline splits off from the Druzhba Pipeline near the Belarusian border and bypasses Belarus, which has tried to increase transit tariffs and, according to Russia, has illegally siphon oil destined for Europe in the past.

The Ust-Luga seaport was chosen as the final destination for BTS-2 for a number reasons. The Gulf of Finland has a short ice-over period and provides easy access to other major ports in Northern Europe. Ust-Luga is also located far away from the congested St. Petersburg transit hub and is currently undergoing significant infrastructural development. Russia’s Ministry of Transport and Russian Railways have teamed up to construct a number of highways and railways that will strengthen transportation links between the seaport and major commercial hubs in northwest Russia.

Transit disputes between Russia, Belarus, and Ukraine have hurt Moscow’s image as a reliable oil and gas supplier to Europe, and the start of commercial operations of the Ust-Luga oil terminal marks a strategic victory for Moscow in its drive to reduce reliance on former Soviet transit countries.

Copyright 2012, OGE. All rights reserved.

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