The financial crisis that struck Russia in 1998 has left a deep impact on the economies of the Baltic Sea region. Finally, in the first months of 2000, Latvian, Lithuanian and Estonian oil terminals managed to increase their loading volumes by approximately a fifth. Income from oil export was one of the few cash income sources to crisis-exhausted Russia also in 1999. As a result Latvian, Lithuanian and Estonian oil terminals altogether handled 30.4 million tons of oil products and 14.8 million tons of crude oil last year.
Ventspils - the Largest Storage Capacity
During recent years, Ventspils handles approximately half of the oil and oil product transit flow that passes through Baltic ports. The region's leading oil terminal Ventspils Nafta last year loaded 18.4 million tons of oil and oil products, while the second largest oil product terminal of this port, Ventbunkers, handled 5.9 million tons.
Each year the competition in the transit business is growing, especially from the Tallinn port terminals in oil product handling as well as from the Gdansk and Rostock facilities in the area of crude oil shipping.
«Ventspils Nafta is ready to compete, and we believe that we have chances to win,» Ventspils Nafta President Igors Skoks said last year. «The fact that now Ventspils Nafta is technologically one of the most advanced and modern oil terminals of the Baltic Sea region help us to secure our positions in the long run,» he stressed.
Ritvars Priekalns, Deputy General Director, says, concerning the investment policy of Ventspils Nafta, «the goal of the investment policy of the terminal is to ensure growth in the volumes of oil we can handle and to increase the capacity of the oil and oil product tank storage farm to 1350 million cubic metres. By implementing projects to amplify the throughput capacity of the oil pipelines in the direction of Ventspils, capacity of the tank storage farms for crude oil of Ventspils Nafta will rise to 800,000 cubic metres.»
The terminal is designed to handle 16 million tons of oil and 10 million tons of oil products per year. Several years ago, the Port of Ventspils was dredged and, as a result, now liquefied cargo aframax tankers with a capacity above 120,000 dwt can access the piers. «The dredging of the Port of Ventspils was successful and obviously a major advantage to shipowners. The cargo transport corridor to the Ventspils Nafta terminal has thereby become even more competitive. According to the calculations of Ventspils port authority, in absolute numbers, the yearly expenses decrease by 15 million USD.»
During the last four years, more than 130 million USD have been invested in the development of Ventspils Nafta. In January of this year, terminal authorities approved an investment programme until 2005. According to this programme, another USD 45 to 50 million will be invested this year. These resources will help to finish building of the trestle for light oil products, to renovate some of the trestles currently in use and to build a new oil pipeline from the terminal to the piers of the port. In 2000, Ventspils Nafta will also fully automate the technology of oil handling.
The main investment target for Ventspils Nafta is the storage tank farm. It receives the largest part of total investments, which has already helped to increase its capacity to 1.1 million cubic metres. In 1998, the first new storage tanks built at the Ventspils terminal for the past 17 years were opened. «A larger storage tank farm will allow us to open a new service - storage of oil and oil products» explains Igors Skoks.
From 1998, till the beginning of 2000, there were 13 storage tanks with a capacity of 20,000 cubic metres, and two new tank-in-tank storage units with a capacity of 50,000 cubic metres that opened for business last year. Almost a quarter of all storage tanks in the farm are of this type. Other two-tank storage units with an additional 50,000 cubic metre capacity are currently in the process of being built and should be launched by September 2001.
Approximately 15% of this year's investments will be designated for ensurance of environmental protection. By this summer, Ventspils Nafta hopes to receive the international environmental and quality certificates ISO 14001 and ISO 9000.
A/S Ventspils Nafta that was established for handling the operations of this port was put up for privatisation in 1997. Currently the state still owns the largest share in this company - a 44% share portfolio. 37% of the company for four years now belongs to the private Latvian transit company, Latvijas Naftas Tranz?ts. Thousands of the small shareholders bought Ventspils Nafta shares with privatisation vouchers. Some capital redistribution has taken place since the shares of Ventspils Nafta were available for trading on the Riga Stock Exchange. The plan is to sell all state-owned shares either on the international market or through the Riga Stock Exchange.
Tallinn: the Most Flexible Terminal
Judging by the number of oil terminals, Tallinn is definitely the leader among the countries of the Baltic Sea region. At the beginning of the 90s, several foreign companies came here aiming at making a profit through the transit of Russian oil products. Companies like the American Coastal Corporation, the Finnish Neste and Sonmarin, the Dutch Pakhoed and the Danish Eurodek together with Russia's LUKoil decided to stay and build their own terminals. Today they are among the largest foreign investors in Estonia.
As BC found out on a recent visit to Tallinn, the secret of the success of these terminals is pretty simple. The amounts of oil products that are now brought to Tallinn were earlier exported through Finland.
The Finns themselves have basically decided not to deal with the transit of Russian oil products but are looking ahead to enjoying their share of crude oil in the case that the Finnish port, Porvoo, will become the end point in the Russian project, the so-called Baltic Pipeline System.
Pakterminal is the largest oil product terminal at the Port of Tallinn and in the Baltic States as a whole. Among others in Tallinn are the terminal in Maardu E.O.S. (a daughter company of Coastal Corporation) and Eurodek Transkeemia Eesti (a joint venture of the Russian LUKoil and Danish Eurodek).
Since 1992, investments into the development of Pakterminal have totalled USD 50 million. As the chairman of Pakterminal Board, Raivo Vare, told BC, the cornerstones of the terminal's investment policy are the gradual growth of production capacity, investments financed by their own resources, single investments of moderate amounts, and short payback periods. Until now Pakterminal has engaged in short term (one to two year) investment programmes.
One of the basic components of the investment policy of Pakterminal is increasing the throughput capacity of the piers. «We have invested more than EEK 135 million (USD 8.4 million - approximation by the author) in building and reconstruction of the currently utilised piers» tells Raivo Vare.
In 1998, Pakterminal invested in dredging the basin by the port's first pier and now it is open for tankers with 70,000 dwt. Since 1998, Pakterminal has not built any new storage tanks and today the total capacity amounts to 197,500 cubic metres.
Pakterminal has taken out a loan for investments only once. In 1995, the EBRD allocated a loan for financing the 40,000 cubic metres of additional storage tank capacity, a railway trestle with 26 places and a 1.5 kilometre long railway.
Klaipeda: the Best Renovation
The construction of a state-of-the-art oil terminal at Klaipeda is in its sixth year; it will be one of the most modern in Europe. Since 1994, reconstruction of the Klaipeda oil terminal has cost 124 million USD. The image of the terminal this year will be completely altered.
Klaipeda has a tank storage farm of 380,000 cubic metres and the terminal can annually handle around 7 million tons of oil products. However, during the reconstruction years, the turnover varied between 2.2 and 4.2 million tons. Earnings have been too short for the reconstruction to go smoothly or for it to meet the scheduled deadlines.
Shareholders of Klaipedos Nafta decided to channel USD 8.9 million of the USD 9.9 million profit for 1999 into various investment projects. This year, for the first time since establishment of Klaipedos Nafta, the company will pay out 2.5% of its profit in dividends. Soon it plans to issue shares for the amount of USD 20 million thereby increasing the share capital to USD 80.5 million. After the astonishing results of the first months of 2000, management of the Klaipeda terminal predicts that, in the spring, capacity utilisation will reach maximum levels and the total loading volumes of the year will exceed 6 million tons.
Creditors of Klaipedos Nafta - ABN Amro, Standard Bank, Kredit Bank PBI - include several local banks and the largest shareholder (the state-owned Naftos Terminalas). This year debt repayments will amount to USD 19.4 million. In 2001, it will be USD 20.3 million, and during the following three years another USD 45.5 million.
Building of the infrastructure for handling of light and heavy oil products was finished last year. Works on the railway lines are still in progress; this is the closing stage of the reconstruction of the Klaipeda oil terminal. The last of the rail lines will be used for loading of light mazut and crude oil, currently not being serviced in Klaipeda. The terminal awaits assistance from the Port Authority in terms of dredging the channel of the port to allow access of tankers with 80,000 dwt instead of the current 40,000 dwt.
A Lithuanian-American joint venture, Klaipedos Nafta was established in 1994 for reconstruction of the Klaipeda terminal. Now the Lithuanian company, Naftos Terminalas, owns 68.8% of the shares; the second largest shareholder is Osman Trading registered in Ventspils with a stake of 11.3%. The remaining part of the stocks are distributed among Woodison Trading, British Duboil and Ferrous Investment, American Lancaster Distral, Dilan Trading, Lithuanian Vilfima and other minor shareholders.
Butinge: the Most Expensive Baltic Oil Terminal
In terms of total investments, construction at the Butinge terminal could be considered as the most expensive project of the Baltic oil industry. The youngest of the terminals (its building was started in 1995) made its debut last summer. Provisional data shows that building of the Butinge oil terminal cost USD 260 million. An extensive share of these expenses were attracted in 1997 in form of a 101 million loan issued for three years by Union Bank of Switzerland, Ex-Im Bank (USA), Kreditanstalt fur Wiederaufbau, Mitsubishi Bank, the Nordic Investment Bank and Merrill Lynch. Later credits were received from other banks, including the largest creditor of the Klaipeda terminal, Dutch ABN Amro.
A lot of this money for many years ahead will be the debt load for the owner of the terminal - the oil corporation Mazeikiu Nafta controlled by the US company Williams International. However, despite this burden, the owners of the terminal are optimistic about the future. Next year, the company plans on increasing the capacity of the Butinge terminal one and a half times. According to the terminal's chief engineer Vilnius Aksinavicius, the current throughput capacity is 8 million tons a year.
There are plans to build three new storage tanks in Butinge with the capacity of 50,000 cubic metres each that will increase the total storage capacity from 130,000 to 280,000 cubic metres. The transhipment potential of Butinge will be increased to 12 million tons a year (or 240,000 barrels a day). As the Director of the Butinge terminal Valter Hillard said in March, chances are that soon there will be one more buoy in the sea.
Rostock: the Right Setting
From its size, the Rostock oil port can be compared only with Ventspils. BC had the opportunity to visit this impressive storage tank farm with a capacity of 700,000 cubic metres. Special care is clearly visible; each storage tank has its own name.
The Rostock oil terminal was built in the fifties for handling oil supplied to German oil refineries by rail. Since the oil pipeline system Druzhba was launched, the circumstances have changed. From that time till the fall of the Berlin Wall, Rostock served as the base for oil product supplies to the nearby regions and the exports allowed Eastern Germany to earn hard currency.
Today Rostock is back where it began: loading crude oil. In 1999 Russian crude oil constituted to approximately 2 to 2.5 million tons of the 5 million turnover. Grosstanklager Olhafen Rostock handle also the oil products that are supplied to Rostock from Denmark, Sweden, Norway, Great Britain, France, and sometimes - from Finland.
A year has passed since the modernisation of the Rostock oil port, dredging one of the piers to 14 metres to make it accessible for vessels with a capacity over 100,000 dwt. Total investments into the reconstruction works amounted to DEM 245 million from the port and state budget. Operator company Grosstanklager Olhafen Rostock invested 12-14 million DEM in the modernisation of the port.
The new pipeline from Rostock to the reconstructed refinery in Bohlen was built one and a half years ago. Today a million tons of naphta from Russia, mostly delivered from the Port of Tallinn is pumped between Rostock and Bohlen. The American company, Star Chemicals, which owns the refinery in Bohlen, invested DEM 100 million in the construction of three modern tank-in-tank storage units to be used for this freight in the port of Rostock. 550 kilometres long, the pipeline from Rostock to Bohlen required investments of more than DEM 500 million, that is 1 to 1.5 million DEM per kilometre.
70% of the company Grosstanklager Olhafen Rostock established in 1996 is owned by Kent Investment. The latter was established by several entrepreneurs from Tel-Aviv. The remaining 30% belongs to the French enterprise Elf Aquitaine. Elf Oil Germany, one of the leading oil corporations of Eastern Germany, controlling a large share of the oil product trade, is also owner of an oil refinery in Leuna.
Gdansk: a Mysterious Competitor
Only two years ago did the Gdansk-based oil terminals receive special attention from Russian exporters. In Gdansk, after a 5-year intermission, in April 1998, tankers were loaded with the Russian Urals crude oil. After the Soviet Union collapsed, Gdansk dealt only with oilimports to satisfy the local oil refineries - sometime around 1992, Poland refused the crude offered by «the Big Brother».
Besides the fact that the terminals of Gdansk generated great interest from Russian oil exporters, they also enjoy the favourable Polish-Russian relations on the international scale. The new gas pipeline from the Yamala Fields in Russia, with the help of which Gazprom hopes to secure its positions on the liberalised Western gas market, goes through Poland. Today Gazprom is not only the co-ordinator of the oil export in the direction of Gdansk, but also the largest Russian investor in Poland. As at the beginning of 1998, this gas corporation had invested the largest share of the total investments into this country.
Various opinions were expressed in the discussion about the competitiveness of the Gdansk port with Ventspils. The new competitor has undoubtedly forced Ventspils to reconsider its tariff policy and become a bit more tolerant towards the vagaries of particular clients. According to the expressions of an official of the Russian oil corporation Sidanko last spring, export through Gdansk is 1.5 USD/t less expensive than via Ventspils. The same conclusion was made by several other experts. The transport through pipelines from Russia to Ventspils is more expensive than to Gdansk, and the tariffs are also different. Since the polish port authorities disclose neither the tariffs for pumping the oil from the Polish-Belarussian border, nor the handling tariffs in the terminals of the port, the calculations are based on the experience of eyewitnesses.
Currently crude oil and oil products to Gdansk are transported from the four deepwater piers of the liquefied cargo terminal with a capacity of up to 33 million tons. This pier can service vessels with a draught of up to 15 metres. An oil pipeline connects the terminal with the refinery in Gdansk. The port itself does not have a tank storage farm - nor do there seem to be any plans on the blackboard for creating one.
Crude oil is handled by two companies: Port Polnocny Ltd (Northern Port) and Naftoport Ltd which were established in the beginning of 90s - the time of mass privatisation of the port's companies. The largest of the two, Naftoport, is owned by the management along with the oil refineries in Polotsk (38% of the shares) and Gdansk (27%).