Crude and Oil Products Exports from Russia: Long-Term Trends and Higher Priority Destinations

September 25, 2011

primarily, to Europe. At present, less than 20 percent (17 percent or 38 million tons) of its export crude is shipped to the Pacific market, mainly, to China (Table 2).

   The Atlantic market remains the principal destination for Russian crude and oil-product exports. Technologically, deliveries to that market already have reached saturation point and have stopped growing over the past few years. The demand for oil in Europe, which accounts for nearly 80 percent of Russia’s oil exports, has mostly remained stagnant, while at the same time decreasing in a number of countries, primarily, Germany, Great Britain, Italy, France, the Netherlands and Belgium. Russia faces its toughest competition from Middle East and North African suppliers shipping to Southern European markets, and from Canadian, West African, and South American suppliers shipping to the U.S. Atlantic Coast. Russia’s prospects for its own share of the Atlantic market will mostly be linked to the continued decrease in production in the North Sea, something that should allow Russia to increase its deliveries to Northern and Western Europe, primarily through Rotterdam. Russia will also have to try and maintain its direct pipeline shipments to refineries in Poland, Germany, Belorussia, the Czech Republic, Slovakia, and Hungary and to continue its hybrid deliveries to Russian-controlled refineries in Ukraine, Romania, Bulgaria, and Serbia.

   Over the past several years, against the background of diversification of export routes and development of new oil and gas centers in Eastern Siberia and in the Far East, there has been an increase in the deliveries of crude oil and oil-products to the Pacific market, which is today the biggest and fastest growing market for energy products in the world, combining the countries of the Asia-Pacific Region and the Pacific Coast of the Americas. Oil production in the region is showing a trend toward reduction, while the consumption and imports from other regions have been growing at a fast pace. While Russia’s main competitors on the Pacific market are, primarily, Middle East countries, the distances over which their own shipments must travel are on average two to five times longer than the distances that deliveries must travel from West or East Siberia. Moreover, they involve additional transportation risks (including passing through the Gulf of Aden, the Gulf of Oman and the Straits of Bab el-Mandeb, Hormuz, and Malacca). The main customers for Russian oil and oil-product exports to Pacific destinations include China, Korea, Japan, the United States, Thailand, and Singapore. While China is likely to remain the region’s most lucrative market in the coming decades, there are some good prospects for considerably expanding exports to Korea, the U.S., Philippines, Thailand, and Vietnam and for starting shipments to Indonesia.