15 Aug 2022 12:28

Rosneft: substitution of Russian oil at Schwedt refinery to lead to underutilization of capacity, rising fuel prices in Germany

MOSCOW. Aug 15 (Interfax) - Rosneft is warning of underutilization of capacity at the PCK refinery in Schwedt, Germany, and a rise in fuel prices in Germany in case of substitution of Russian oil for processing at the refinery. At the same time, the refinery's shareholders are still looking for options to use oil grades other than Urals and are considering diversification and blending, the Russian oil company, which is the largest shareholder in the Schwedt refinery, said in a statement.

"Due to the situation around oil supplies to Europe, shareholders of the PCK refinery are considering various options for using oil grades other than Urals when refining fuel. For this purpose, the possibilities of diversification of feedstock supply routes to the refinery and blending of different oil grades are being studied. As part of this process, a test batch of crude arrived at the Rostock port from the U.S. for the PCK refinery," the statement reads.

At the same time, the cost of U.S. feedstock is one-third higher than the price of Russian oil, established in long-term contracts. Transportation by tankers is considerably more expensive than pipeline supplies. The additional costs of replacing Urals volumes with "alternative" feedstock are estimated at up to $20 million, Rosneft said.

"It is also important to note that, unlike the Druzhba pipeline, which brings Russian oil to the refinery, the pipeline from the port of Rostock allows PCK to be loaded only by half. At the same time, underutilization of the refinery does not reduce its operating costs, which leads to a sharp drop in production margins. According to our estimates, the loss from PCK's operation in this mode would amount to about 300 million euros per year, which would lead to a significant reduction in tax revenues for the German budget. These costs will require additional compensation: in the absence of an opportunity to increase production volumes, the shareholders of the refinery will be forced to revise the pricing of petroleum products," the statement said.

Since its design stage, the PCK refinery has historically been associated with the Druzhba oil pipeline and Russian oil fields. "It is virtually impossible to replace these volumes both physically and technologically. The Schwedt refinery meets more than 90% of the Berlin-Brandenburg region's gasoline, paraffin, diesel and heating oil demand. "Even partially replacing Russian supplies would cause underutilization of capacity and cause the cost of petroleum products to skyrocket, and the shortage of these products is already a serious threat to the German consumer market," Rosneft said.

PCK Raffinerie GmbH is located in Schwedt, Brandenburg. The location of the refinery allows it to deliver Urals crude oil through the Druzhba pipeline. The annual capacity of the refinery is 11.6 million tonnes of oil products. In addition to Rosneft, Shell (SPB: RDS.A) and Eni also have stakes in the refinery.