14 Jan 2013 18:00

Belarus starts returning petroleum products to Russia

MINSK. Jan 14 (Interfax) - Belarus has started supplying petroleum products to Russia in keeping with fuel balance commitments in Q1 2013, Belarusian refining concern Belneftechim told Interfax.

"The St Petersburg exchange started to operate after the New Year and Christmas holidays on January 10. Belarus is putting certain volumes of petroleum products up for sale on this exchange in the framework of its commitments related to the balance," the concern said.

"Some volumes are being sold and others not," the concern said, without saying what volumes of gasoline and diesel fuel were at issue or whether prices had anything to do with this.

Belarusian refining market sources say that according to agreements reached by Belarus and Russia, Belarusian suppliers will be able to sell gasoline in Russia this year at previous closing prices on the bourse, in other words at minimum profit, and diesel as in 2012, at a loss.

Moscow and Minsk also reached agreements at the end of last year whereby both Belarusian and Russian companies would supply petroleum products to Russia in proportion to their refining volumes.

A source said Belarus had undertaken to supply 1 million tonnes of winter diesel to Russia this year, in the periods January-April and late autumn-December, but with the bulk in the first quarter of 2013 to coincide with Russian refinery upgrades and their readiness to produce winter diesel.

The source said that changing the geography of petroleum products supplies could result in a lower share of toll-refining for Belarusian plants than the 50% they had in 2012, which was ideal for the refineries.

"This could potentially reduce toll-refining of Russian crude at Belarusian refineries as the priority for Russian companies has been and remains exports to the West," the source said.

Given that Belarus is due to supply Russia with a significant volume of petroleum products in 2013, Belarus's own more lucrative exports to the West could decline.

"Together with the reduction in tolling, this could all hurt refinery margins considerably in the first quarter of 2013," the source said.

The Belarusian Finance Ministry has said oil refineries were among the country's ten most profitable companies in January-September 2012.

But the fulfillment of obligations to return petroleum products to Russia will depend how much crude Russia supplies to Belarus in the second and remaining quarters of 2013.

Final agreements on oil supplies this year have yet to be reached. Minsk is asking for 23 million tonnes of Russian oil this year, and Russia says it is prepared to supply 18.5 million tonnes altogether, by pipeline and rail.

The countries agreed at the end of December that Belarus would receive 5.75 million tonnes of oil in Q1 2012, 5.025 million tonnes of it by pipeline, which is proportionate to the 23 million tonnes that Minsk is requesting for the whole year.

Belarus received 21.297 million tonnes of Russian crude in 2012, 17.4% more than in 2011, but could have imported 21.5 million tonnes as per the fuel balance for the year. Belarusian refineries processed 21.7 million tonnes of crude, 5.7% mote than in 2011, the Council of Ministers has said.