July 13 (Bloomberg) — A new Russian crude oil export pipeline may cut supplies to refineries in Hungary, Slovakia, Germany and some other central European countries, PVM Oil Associates GmbH said.

Russia plans to build a link that will deliver at least 1 million barrels of oil a day for export by tanker from the port of Primorsk the Baltic Sea. The pipeline will also reduce supplies of Urals, Russia's major export blend of oil, to refiners in Lithuania, Poland, Ukraine and the Czech Republic, said PVM's Managing Director Johannes Benigni.

The 1,000-kilometer (625-mile) pipeline will run from Unecha, near the Russia-Belarus border, to Primorsk. It will cut deliveries of Urals from Russia through the Druzhba inland pipeline to Europe, forcing central Europe's refiners to buy more expensive oil from elsewhere, PVM said.

``The reduction of supplies through the Druzhba line will wipe out the price advantage of lower pipeline tariffs compared to seaborne barrels, Benigni said today in an e-mailed statement. ``Thanks to cheap crude supplies, refiners along the pipeline enjoy healthier margins than their counterparts who depend on supplies from sea.

Central European refineries will have to pay between 50 cents and $4 a barrel more for seaborne oil deliveries, according to PVM's report, published today. Higher operating costs may cut refiners' market value and make them targets for acquisition by OAO Rosneft or OAO Lukoil, Russia's largest oil producers, which have plans to add processing capacity.

`Turn Sour'

``Costly oil could be a disaster for refiners in Hungary and Slovakia and refinery margins in these countries could easily turn sour,'' Benigni said.
Hungary's Mol Nyrt., eastern Europe's largest oil refiner by market value, and other regional refiners are the biggest purchasers of Urals oil through the Druzhba pipeline, which crosses Belarus and Ukraine.

Druzhba pipeline oil shipments fell 23 percent to 1.2 million barrels a day in June from the same month last year, according to Russia's Energy Ministry. Russia has cut supplies through the link to Lithuania after a leak was reported last year.

Russia has had a ``transport jam'' since the collapse of the Soviet Union, First Deputy Prime Minister Sergei Ivanov said on July 8, cited in a report posted on OAO Transneft's Web site. Primorsk will be able to load as much as 130 million tons a year (2.6 million barrels a day) of crude and oil products, according to Ivanov.

Transneft, Russia's state-owned oil pipeline monopoly, will build the new link, or the second phase of the so-called Baltic Oil Pipeline System. It will cost as much as $2.5 billion in investment and will take 18 months to complete, PVM said.

European refiners usually buy Urals at a discount to Brent oil, which is pumped in the North Sea. Brent crude oil for July settlement gained 79 cents at $77.19 a barrel on the ICE Futures exchange at 1:35 p.m. in London. Urals traded in the Baltic Sea rose $1.17 at $75.10 a barrel yesterday.

Pipeline Reversal

Restricted supplies through Druzhba may encourage the reversal of a pipeline planned to ship oil from Bratislava in Slovakia to Austria's Schwechat refinery, according to PVM.

OMV AG, central Europe's biggest oil company, and Russia's OAO Yukos Oil Co. in 2003 agreed to invest 28 million euros ($39 million) to build the 72,000 barrel-a-day link to supply crude from Druzhba to Schwechat refinery. Transpetrol AS, a Slovak pipeline company in which Yukos owns a 49 percent stake, had planned to build the 60-kilometer stretch.

``Changing circumstances might force operators to reverse the flow of oil'' to Bratislava, PVM said.

Yukos has sought to sell a 49 percent stake in Transpetrol.

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This is a huge story, probably the biggest economic story that you'll read for the next month. For those that don't know I'll try to bring you up to speed. The Druzhba pipeline flows through Polakistan, who has recently agreed to install a US missle defense system that target Polakistans neighbor Russia. The irony of this part of the story is this pipeline is refered to as the Friendship Pipeline. Before Polaks agreed to do this the Druzhba pipeline was delivering 1.6 million barrels of crude each and every day. With friends like Polaks it's easy to understand why their neighbors throughout history have constantly invaded them.

Now the real juicy part of the Druzhba Pipeline is of course what the Bloomberg author conviently forgets somehow to point out. How the Anglo Press can constantly forget this important point of the story is beyond me, but it helps one to understand if Bloomberg can overlook the biggest economic part of this story, what are they leaving out for all those other economic stories? The Druzba Pipeline requires Uncle Bucks for oil to flow across Polakistan. It really doesn't matter that Russia has repeatedly stated they've collected enough Green Pieces of Paper for their precious Natural Resources, Polaks force Russians to accept d0llars. Now why the hell would a European country if you can call Polakistan European want to charge D0llars instead of Euros to conduct trade in Europe? Fortuantely for Russia the story states that this will only last at the longest another 18-months.

Primorsk will be able to load as much as 130 million tons a year (2.6 million barrels a day)

This is pretty amazing because no more than two years ago Primorsk was only exporting 50 million tons of crude per year. Odd the honest boyz at Bloomberg don't mention this fact either. Why the HUGE increase in exports out of Primorsk, some uninformed, lied to western reader might wonder. Hell the Western press says we'll run out of oil next week, why's Russia exporting their oil in the first place? Well the exports shipping out of Primorsk don't require d0llars for Russian oil, hell they refuse to accept d0llars for Russian oil, at 2.6 million barrels per day that's a huge dent in Petrol D0llar recycling, exports through the Friendship Pipeline are already off 23% since June of last year when all this Polak Missile Defense Shield bullshit got started.

This part is really funny

OMV AG, central Europe's biggest oil company, and Russia's OAO Yukos Oil Co. in 2003 agreed to invest 28 million euros ($39 million) to build the 72,000 barrel-a-day link to supply crude from Druzhba to Schwechat refinery.

I like this because at the time Yukos was still Rothschild property in 2003, well that's no longer the case anymore.

I can't imagine the rest of Europe wants to pay with d0llars for Russia's oil, the only country to really be screwed by this is Polakistan, maybe the Ukraine, but it looks like the Ukraine is getting ready to rejoin the Russia sphere of influence instead of the UK/US Israeli sphere of influence that the Orange Revolution was financed by. This is going to be an interesting next six months, because once again the Bloomberg story forgets to add that Russian's don't even need this new pipeline to be completed before they can shut Polakistan's Friendship Pipeline down, Russian Railroad already has the capacity to export the required crude through Primorsk. We live in interesting times. Peace.

Comments by Tet