The introduction of the EU embargo on fuels from Russia on February 5 may cause temporary turmoil on the market, say representatives of the fuel industry. They point out that the embargo will primarily result in a new global fuel supply architecture.
We have known about the sanctions package related to the ban on imports of Russian petroleum products, which will come into force on February 5, from June 2022, and everything indicates that as a country we are prepared for it, he told PAP Robert Brzozowski, vice-president for commercial affairs of Unimot.
“We do not expect major turmoil on the market, but they cannot be completely ruled out either,” Brzozowski added. He reminded that until now, about 1.2-1.5 million tons of diesel fuel had flowed out of the ports in Primorsk, mainly for the European market.
As noted chief economist of PKN Orlen Adam B. Czyżewski, Europe already imports significantly less diesel from Russia than a year ago, and the embargo will primarily cause a change in the direction of diesel oil flows around the world.
“There will be some turbulence on the market, but the situation should stabilize. Both in Europe and in the world, there are possibilities to adapt to the EU embargo on ready fuels, including diesel,” Czyżewski told PAP.
In the economist’s opinion, if Russia cannot sell diesel in Europe, it will sell it to China, India, Africa or Latin America, and therefore those countries will buy less diesel elsewhere. Over time, global flows of this fuel will be redirected, but it will take time, he stressed. The embargo on Russian oil transported by tankers did not cause anything violent on the market – he reminded.
The vice-president of Unimot assessed that the product is available globally, e.g. in the Middle East, the United States or China, which have limited internal demand due to the pandemic situation. However, it takes longer to deliver it to Poland, and it is more expensive.
“The challenge will be the extended logistics chain – a ship from Primorsk sails to Gdynia in 2 days, from the Red Sea – 30 days, and from India about 40 days. Due to the distance, the product is also delivered by larger ships that cannot call directly at the ports of Gdynia and Świnoujście due to too shallow depth” – said Brzozowski.
As he explained, Polish ports are adapted to handle tankers with a capacity of about 35,000 tons. tons and such ships sailed directly from the port of Primorsk. Meanwhile, diesel from further directions is transported in large tankers with a capacity of about 100,000 m3. tonnes, so it must be reloaded onto smaller tankers in ARA ports or in the Danish straits to reach ports in the Baltic Sea.
As Brzozowski reminded, at the beginning of April 2022, Unimot rented a terminal in Danish Gulfhavn, which enables the transhipment of diesel oil from the largest tankers coming to Europe from directions other than Russia and further transport of fuel to Poland, and – if necessary – to all other ports in the Baltic Sea basin.
“Thanks to him, we have completed three deliveries of diesel oil so far – two from Saudi Arabia and one from India. The contract for renting the terminal was concluded for a year with the possibility of its extension, which we have already used and extended it for another year” – noted the Vice President of Unimotu.
Adam B. Czyżewski, in turn, pointed out that it is difficult to say at the moment how Russia will react to the embargo, for which this is the last opportunity this winter to disrupt the markets. There will be no such possibility next winter, because production in new refineries will start and fuel supply will improve.
“After the first quarter of 2023, at the end of winter, the demand for diesel from the power and heating sectors will fall. Thus, part of the supply will be released. The slowdown in economic growth will also translate into lower demand, so in the second quarter the effects of improving the situation should already be visible. In the third and fourth quarters, new refineries will start to be commissioned, eg the ExxonMobil plant in the USA, Nigeria, India and South Korea.” Czyzewski pointed out.
The vice-president of Unimot, in turn, assessed that in the near future the prices of imported diesel will certainly increase due to higher logistics costs.
“However, it cannot be directly stated that this will translate into an increase in fuel prices for retail customers, because the price of fuels at stations is affected by many variables, and the cost of bringing them to Poland is only one of them” – noted Brzozowski.
He emphasized that Unimot – the largest independent importer of fuels in Poland, as well as the operator of a network of over 100 filling stations under the AVIA brand – is preparing to introduce an embargo so that wholesale and retail customers will be affected as little as possible. (PAP)
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