Belarusian Oil Market to Become a Battlefield for Russian Companies

Until recently, the situation with the supply of Russian crude oil to Belarusian oil refineries has been developing quite predictably. Certain problems in relations between the partners emerged solely in terms of coordinating the quarterly supplies and the annual balance. Minsk asked for more (23 million tons for 2013), and Moscow expectedly offered to provide less – 18,5 million tons.

Uralkali as a Catalyst of the Process

Everything changed all of a sudden, and notably the wind of change started to blow from where it was less expected to. Vladislav Baumgertner, Director General of Uralkali, was arrested in Minsk on August 26. Two days later, Transneft unexpectedly announced its plans to carry out repair works at the Druzhba pipeline in September. The company’s representatives reported, that the repair works will lead to the reduction of oil supply agreed for September by 400 thousand tons, and offered oil companies to redirect this volume for export via Ust-Luga, Primorsk or Novorossiysk.

Nevertheless, a number of Russian officials including Deputy Prime-Minister Arkady Dvorkovich predictably announced that no political background should be seen in such extraordinary course of events. Many commentators have agreed that oil refining industry, which is crucial for the Belarusian economy, is faced with serious problems, which can be solved only by immediately backpedalling on the policy in the so called “potash scandal”.

However, Minsk turned out to have an ace up its sleeve against Russia. Igor Sechin conducted negotiations with Alexander Lukashenko and Igor Zhilin, the Chairman of Belneftekhim concern, on September 11. In the course of negotiations the Head of the Russian oil giant confirmed, that his company would fulfil its contractual obligations for the supply of oil to Belarus. Moreover, Mr. Sechin offered to make Rosneft the sole supplier of oil to Belarus, and award it with the status of “special importer”. This initiative was welcomed by the Belarusian President, who commissioned the government to consider this alternative thoroughly.

This hypothetical scenario, which was announced on the meeting in Minsk, couldn’t but raise concerns among other market players. For instance, LUKOIL President Vagit Alekperov made a stand against this idea on September 27. “I believe, that equal access of all market players should be retained. It made it possible for Belarus to maintain balance and make arrangements with various suppliers… Today there is a law stipulating the access of all legal entities to the pipeline network of the Russian Federation”, – he announced on the sidelines of Sochi-2013 investment forum. Belarusian oil refining industry is immensely attractive for Russian companies, so the competition for leadership in this sector is going to be extremely rough.
Market Players in Belarus

At the present time, eight Russian companies supply oil to Belarus.

The strongest position is held by Rosneft, being the major supplier (considering the TNK-BP allowance). Igor Sechin claimed, that his company accounted for approximately half of oil processed at Belarusian refineries, as early as in May.

Besides, it owns 42.58% of shares of Mozyr Oil Refinery (via Slavneft –