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Lithuania seeks alternatives to Belarus' freight amid Minsk-Moscow oil dispute

BC, Vilnius, 03.04.2017.Print version
An ongoing dispute between Minsk and Moscow over Russian natural gas and oil supply terms has affected revenues of Lithuania's oil product terminal operator Klaipedos Nafta (Klaipeda Oil) and Lietuvos Gelezinkeliai as Belarusian crude refineries' exports via the port of Klaipeda have almost stopped.

The Lithuanian companies are looking for alternatives to Belarusian shipments.

Russia and Belarus have failed to agree on the gas price for more than half a year now. Amid a shortage of crude due to a cut in Russian oil deliveries, Belarus' refineries sell almost all fuel they produce in the domestic market.

As a result of this, Klaipedos Nafta posted a 23% y-o-y drop in oil product loadings for the first two months of this year and Lietuvos Gelezinkeliai saw oil product shipments slump down by 63% to 304,700 tons.

However, Lithuanian Transport Minister Rokas Masiulis expects that Moscow and Minsk will reach an agreement, noting that the state railway operator, meanwhile, is increasing the transportation of other products.

"This is a common situation. We hope that the countries will agree, sooner or later. In the meantime, the volume of other freights, such as fertilizers, is growing," he told.

Egidijus Lazauskas, director of the Freight Transportation Directorate at Lietuvos Gelezinkeliai, says that freight traffic from Belarus has come to almost a complete halt and that the company is looking for alternative freights to at least partially compensate for the loss.

"The situation has already affected railway shipments. The flow has fallen sharply. It can't get worse," Lazauskas told.

"Naturally, we have domestic shipments by Orlen Lietuva. Klaipedos Nafta is looking for other oil product sources, but volumes are much lower.  We will probably not be able to fully cover the shortage, but everyone is doing everything they can," he said.

According to Lazauskas, the railway operator is now seeking to increase domestic rail shipments, which are less profitable and, therefore, have been paid less attention earlier. Also, it could transport Iranian oil if it were delivered to Belarus via Klaipeda.

Klaipedos Nafta's acting CEO Marius Pulkauninkas says that the company's operations have been affected by the Belarus-Russia dispute and the decline in Belarus' oil product exports, but it is seeking to generate revenue through diversification.

"We are seeking to diversify our flows, products and customers. We have signed contracts with Orlen, Neste and Viada on the use of our tank truck filling area.  We are looking to have more imports or to use the terminal as a reloading station as well," he told.

According to Pulkauninkas, Orlen Lietuva's exports now account for the lion's share of products handled at the terminal.

Belarus' Mozyr and Polotsk crude refineries earlier exported their products through Klaipedos Nafta.

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