Lukoil ceases to process oil in Belarus in give-and-take basis :: Charter'97 :: News

Lukoil, Russia`s largest oil company, has ceased to supply crude oil to Belarus` refineries for processing on a give-and-take basis.

"We`ve abandoned the processing of oil in Belarus on a give-and-take basis because this is unprofitable for us now," the Lukoil press office told BelaPAN.

However, the press office noted that oil supplies to Belarus would continue. In March, Lukoil was to supply 240,780 tons and has already supplied some 141,000 tons. "This oil was not processed on a give-and-take basis but was sold to enterprises of Belnaftakhim (Belarusian State Petrochemical Concern) and independent market participants," the press office explained.

In 2006, Lukoil supplied more than two million tons of crude oil to Belarus for processing on a give-and-take basis and planned to increase such supplies to four million tons in 2007.

Since the beginning of the year, crude oil prices for Belarus have been set by a joint commission consisting of representatives of Belnaftakhim and Russian oil companies on the basis of the average ARA (Amsterdam-Rotterdam-Antwerp) price applied to Poland`s ports minus transport costs. In February, the per-ton oil price including all duties was $225 for Belarus.

In addition, Russia has imposed a duty on oil exports to Belarus. Under a Belarusian-Russian agreement signed on January 12, Russia`s export duty rate for Belarus is 29.3 percent of the rate applied to oil exports to other countries. Russia reviews the rate every two months on the basis of the world`s oil prices. Since the general rate is $179.7 per ton in February and March, the rate for Belarus is $52.65.

These new conditions, as well as an increase in excise taxes on petroleum products sold in Belarus, drastically reduced the profitability of oil processed in the country on a give-and-take basis.

Until recently, oil processed on this basis at the refineries in Navapolatsk and Mazyr came from Lukoil, Slavneft, Surgutneftegaz, Russneft, Rosneft, LITASCO Belorussia, Univest-M, Slavneftekhim, Triple, Miralex, Belrosneft, Sibtechnostal, Toplivoresurs, PrimexBelOil, and Iterbelnafta.

As much as 21.5 million tons of Russian oil was processed at the two Belarusian refineries in 2006. The same amount was expected to be processed in 2007.