Kazakh crude could boost Schwedt output

Kazakh crude could significantly reduce technical problems at the 226,000 b/d Schwedt refinery in Germany and increase output. The first test delivery of 20,000t of Kazakh crude is already on its way to Germany, ordered by Rosneft Deutschland.

The delivery of Kazakh Kebco crude has already passed the Belarusian-Polish border at Adamowo-Zastawa, Rosneft Deutschland managing director Johannes Bremer confirmed on 1 March.

Most of the crude processed at Schwedt since the start of the German embargo against Russia on 1 January has a lower sulphur content of 0.5pc than Russian Urals' 1.8pc, for which Schwedt is designed. Production of intermediates has been more difficult with the crude grades that Schwedt has received via Rostock since Russian supplies via the Druzhba pipeline stopped, production of diesel and gasoline has been more challenging, and no by-products such as bitumen have been produced.

Kazakh crude could partially solve this problem, as Kebco has the same sulphur content as Urals.

State secretary Michael Kellner said in February that the refinery's utilisation is expected to rise to 70pc after maintenance. The test delivery from Kazakhstan will not have an impact on production because the volume is too small. But larger volumes are likely to make a difference, such as a possible 1.2mn t/yr from Kazakhstan, which has not yet been contracted. Bundestag member Christian Gorke spoke of an additional 7mn t that Kazakhstan would be willing to supply to other countries, including Germany.

The supply from Kazakhstan is risky though as it is transported via Russia, which has approved the flow, but the German government is concerned that Russia could unexpectedly stop it, as it has done to Poland, and the federal economics ministry wants diversification of crude flows.

The first delivery of Kazakh crude was ordered by Rosneft Germany, the refinery's majority owner. The alternative supply route via the Polish port of Gdansk is not available to it — in January Poland prevented a ship chartered by Rosneft Germany with crude from docking there, according to Brandenburg economics minister Jorg Steinbach. The crude was transported to Rostock for unloading, but the pipeline from Rostock to Schwedt only has capacity to cover 50pc of the refinery's needs.

Crude delivery via Gdansk is therefore important to increase Schwedt's throughput, but the feasibility of the route has become more uncertain since Russia cut off Polish crude supply via Druzhba on 27 February. Polish oil company PKN Orlen said on 28 February that it will need to import seaborne crude for its 373,000 b/d Plock refinery, which would increase utilisation at the terminal in Gdansk and the pipeline between Gdansk and Plock, making available volumes for Schwedt insufficient.

The German economics ministry said on 2 March that Schwedt is receiving crude from Rostock, Gdansk and Kazakhstan and it is not aware of a lack of slots at the Gdansk terminal.

At the beginning of the talks on crude supplies to Schwedt, Warsaw said it would only support Schwedt if Russia no longer had a stake. The government reiterated this to Argus on 27 February, saying "full co-operation on crude supplies via Gdansk to Schwedt will be possible when Russian companies are not Schwedt shareholders anymore."

Warsaw has insisted on this, even after Rosneft Deutschland was placed under the trusteeship of the Federal Network Agency for six months from September. Asked about possible extension of the trusteeship after 16 March, Bremer said on 1 March: "We have many conversations with customers and other partners who say the same problems will occur again if Rosneft were no longer under trusteeship." Prior to the trusteeship, banks had refused to work with it.

PKN Orlen is also monitoring developments at Schwedt, and said it is not ruling out interest in becoming a shareholder if Berlin decides to sell Rosneft's stake.

Utilisation at Schwedt could also be increased in the long term by upgrading the Rostock-Schwedt pipeline. But the subsidies required need to be approved by the EU, according to the district administration. The pipeline's throughput could have been increased by 5-10pc already by flow improvers at the beginning of this year, Bremer said.

By Alina Rapoport, Natalie Mueller and Tomasz Stepien