Czechs dealing with unexpected fall-out of Russian crude oil supplies

29-04-2019

The Czech Republic on Monday entered its fifth day without crude oil deliveries from Russia, suspended due to contamination. The oil-refinery in Litvínov which had reserves for seven days has already asked to be able to tap the country’s national material reserves.

Illustrative photo: SatyaPrem / PixabayIllustrative photo: SatyaPrem / Pixabay News that Russian crude oil delivered via the Druzba pipeline was contaminated with high levels of organic chloride emerged last week and within hours Germany, Poland, the Czech Republic, Slovakia and a number of other countries suspended imports for fear that the substance could destroy their refining equipment.

Although the Russian energy ministry said Transneft was trying to fix the problem as soon as possible the incident is a test of the country’s preparedness for such a crisis. Czech national material reserves have enough oil in storage to last for 84 days, six less than the 90 days prescribed by the EU. Given this slight deficiency the Litvínov refinery cannot ask to tap oil from the national material reserves directly, but must first get the request approved by the Czech government.

Deliveries via the Druzba pipeline cover two-thirds of overall consumption and although the Czech Republic also gets imports of crude oil via the Ingolstadt pipeline, that is a slightly different type of oil processed exclusively by the refinery in Kralupy.

Consequently, if Russian crude oil deliveries to the Czech Republic are not renewed within the next two days, the Litvínov refinery will either have to temporarily shut down or get permission to process oil from the country’s national reserves.

According to the latest reports from Russia deliveries could be renewed on Monday, but it could be up to two weeks before they reach some recipients. Meanwhile in the Belarussian stretch of the pipeline there is still a million tons of the contaminated oil. Pavel Švagr, head of the Administration of State Material Reserves, said the situation was serious and called an emergency meeting with the country’s main suppliers. He is also in touch with the heads of state material reserves in neighbour states.

Pavel Švagr, photo: archive of Administration of State Material ReservesPavel Švagr, photo: archive of Administration of State Material Reserves “We will want to know the immediate situation of the main suppliers to the market – how big their own reserves are, how they will cover planned deliveries and so on. That will enable us to assess the overall situation better.”

Meanwhile, Pavel Švagr has moved to prevent panic buying and reassure drivers in the Czech Republic that contaminated oil supplies did not reach customers. He said there was no reason to stock up, since the Kralupy refinery was operating at full capacity and if needed Litvínov would continue processing oil from the country’s reserves. He said that, assuming the crisis was resolved in a matter of days, as Russia promised, the fall-out should not affect prices on the market.

29-04-2019