By John Helmer in Moscow
Prime Minister Vladimir Putin has finally put in writing what Gunvor owner, Gennady Timchenko, has been lobbying the Kremlin to support for several years, ousting Transneft pipeline boss, Semyon Vainshtok, in the process. This is a new state-backed crude oil pipeline for the purpose of putting in business a new, Gunvor-owned tanker loading terminal at Ust-Luga, just 80 kilometres across the Gulf of Finland from Primorsk, Russia’s main Baltic oil outlet.
Why Ust-Luga? Gunvor declines through a spokesman to say. Putin’s order, signed this week, authorizes the design and construction of the BPS-2 (Baltic Pipeline System) pipeline that will pump crude from Unecha in the Bryansk region, about 900 kilometres northwards to Ust-Luga. Initial capacity in the Gunvor plan is for 600,000 barrels daily to be ready for tanker loading in 2012. A second stage of the plan, doubling capacity to about 1.2 million bd, is also on the drawing-boards. But the cost of the first stage has jumped from $2 billion, estimated when Transneft’s CEO Vainshtok was opposing Timchenko two years ago, to about $4.8 billion today.
The Geneva-based oil trader has been building the dominant trade position for Russian export crude, and in parallel with increasing the volumes it takes to market, the closely held company has been expanding its positions in rail transportation of oil, port loading, and tankering through ties to Sovcomflot, Russia’s state owned tanker group.
Gunvor has also benefited from the state-assisted breakup of river tanker operator, Volgotanker, on tax claims.
Gunvor’s contribution, according to a company source, has been its superior logistic skills. First invested in the Tallinn Trendgate oil export terminal, Gunvor sold its stake there, and adopted the Ust-Luga port as an alternative, as Russian political sentiment clashed with Estonian nationalism and oil deliveries to Tallinn were curtailed. By taking control of each stage of the transportation of crude, as well as refinery feeds, Gunvor says it can deliver bigger margins to the producers and exporters, its suppliers. This has been challenged by shareholder lawsuits filed earlier this year in Moscow and St. Petersburg, seeking court-ordered disclosure of export contract financials.
Gunvor says it is aiming, not only to rival Primorsk for crude oil loadings, but Vysotsk, the LUKoil outlet near St. Petersburg for petroleum exports. According to a Gunvor source, Ust-Luga will become the biggest outlet for refined products in the region, with a spur line connecting the port and crude pipeline to the Kirishi refinery, owned by Surgutneftegaz. Kirishi is more than 100 kilometres to the east of Ust-Luga.
A negative report just released by Moscow investment bank Troika Dialog criticizes the Gunvor scheme for Ust-Luga as “politically-driven…It is unclear where Transneft intends to find oil for the new pipeline, given declining oil production and exports and already ample spare capacity in the pipeline system. Moreover, some 450,000 bpd of West Siberian crude will be re-routed to fill the first phase of the Eastern Siberia – Pacific Ocean (ESPO) pipeline. Transneft therefore faces the prospect of paying up to $5 bln for a project that would bring no additional revenues.”
After Transneft’s chief executive was replaced in September 2007, it has proved easier for Timchenko to persuade Deputy Prime Minister Igor Sechin, who is in charge of the oil industry, ports and fleets, as well as of Rosneft, one of the major oil suppliers to Gunvor. Putin’s latest order for Ust-Luga means that the new pipeline and tanker terminal should replace the northern route of the older Druzhba pipeline, which transits Belarus and delivers to Poland and Germany.
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