EU Consequences of the ban on Russian oil
2023.01.18 14:28
EU Consequences of the ban on Russian oil
By Tiffany Smith
Budrigannews.com – According to International Energy Agency (IEA) data, Russian exports to the European Union decreased by 270,000 barrels per day (bpd) to 0.9 million bpd in December from the previous month.
From December 5, maritime Russian crude oil imports were prohibited by the EU, and the G7 countries set a price cap of $60 per barrel for Russian seaborne exports. After Russia invaded Ukraine in February 2022, sanctions were imposed.
The IEA reported in its monthly oil market report on Jan. 18 that of the 230,000 bpd of seaborne shipments destined for the EU in December, 160,000 bpd went to Bulgaria, which is exempt from the import ban. One cargo went to Italy, and two went to the Netherlands.
The IEA added that only Bulgaria, out of the 27 EU members, will be able to continue seaborne crude imports from Russia beginning in January.
The ban does not apply to the Druzhba pipeline, which starts in Russia and splits into two branches to go to Germany via Belarus and Poland and Ukraine to Slovakia, the Czech Republic, and Hungary.
At the end of 2022, the pipeline-connected German refineries in Leuna and Schwedt ceased purchasing Russian crude.
Germany, on the other hand, intends to import approximately 30,000 bpd from Kazakhstan via Poland and the northern Druzhba branch.
According to the IEA, this indicates that Druzhba volumes are anticipated to decrease by 330,000 bpd to approximately 360,000 bpd, and that Russia’s share of EU crude oil imports could decrease to just 5% from 27-30% prior to the war.
According to the International Energy Agency (IEA), Russian crude exports to India reached a new record high of 1.4 million barrels per day in December, while exports to China, both seaborne and pipeline, remained broadly unchanged at 1.9 million barrels per day.
To a multi-month low of 45,000 bpd, exports to Turkey decreased by 200,000 bpd. Last month, the state-owned oil company SOCAR of Azerbaijan announced that it had ceased purchasing Russian crude oil for its Turkish refinery.
The first crude oil shipment from Russia’s Sakhalin-2 development in seven months, partially owned by Japanese trading houses and exempt from the G7 price cap, was delivered to Japan in December.
Since February, Russian crude oil exports to the European Union have decreased by 1.6 million barrels per day, including seaborne exports.
According to the IEA, the EU has been increasing supplies from the Middle East, West Africa, Norway, Brazil, and Guyana in an effort to offset the decline in Russian imports.
The International Energy Agency (IEA) stated in November that Kazakhstan and the United States could contribute to the replacement of Russian oil.
Kazakhstan and Moscow have agreed in principle to use Russia’s crude pipeline system to deliver its oil to Germany.
At Western Europe’s largest oilfield, Johan Sverdrup, Norway increased production capacity in December from 535,000 barrels per day to 720,000 barrels per day.
The International Energy Agency stated, “This will be good news for European refiners because it (Sverdrup crude) is the most suitable North Sea replacement grade for Urals.”
Russian companies like Rosneft and Lukoil, which control some of the largest refineries in the EU, had supported the EU’s dependence on Russian crude oil imports.
Germany, on the other hand, has taken control of the Schwedt refinery, which is owned by Rosneft and provides roughly 90% of Berlin’s fuel needs. Rosneft also has a minority stake in two other refineries, MiRo and Bayernoil.
Lukoil has agreed to sell its ISAB refinery in Italy to a group led by G.O.I. Energy, a Cypriot private equity firm supported by commodity trader Trafigura, based in Geneva. However, Lukoil still owns refineries in Bulgaria and Romania.
The largest refinery in Bulgaria, Lukoil’s Neftochim Burgas, has been granted permission by Bulgaria’s parliament for the government to take control of it in the event of a supply shortage.
The refinery is exempt from the EU’s ban on crude imports, but starting on February 5, it can only export its products to Ukraine, which could force it to close, Lukoil has warned.
Lukoil informed the Romanian government that it had discovered alternative sources of crude oil and that a Russian import ban would not affect its gas stations.
From February 5, the European Union will also prohibit imports of Russian oil products like diesel in an effort to punish Russia for the conflict in Ukraine.
