The Baltic Course  

New oil terminal for Riga port

Initially the terminal’s oil product reloading capacity was planned at 10 million tons a year but after the environmental impact assessment procedure this figure was cut to 2.5 million tons. The scope of the project is yet unprecedented in Latvia. Baltic Oil Terminal president Nikolai Yermolayev promises to build “one of the safest oil terminals in the world”

Nikolai Yermolayev

Photo: I.Timofeev

Mr. Yermolayev, how was this grand construction project conceived?

The idea to build a terminal of this scope was born three years ago. At the time we began refining oil at the Novopolotsk oil refinery and also at the refinery in Ufa. We were working with Nafta Moskva? and Kineks, the commissionеr of Surgutneftegaz.  Мoskva Nafta? originated from Soyuznefteeksport – the only Soviet exporter of oil and oil products that has its own representational offices in 70 different countries. Today we have general contracts with the Surgutneftegaz concern and YUKOS.

Current oil extraction in Russia and the CIS is higher than in Soviet times, growing up to 10 million tons annually. In the next five years oil extraction will increase by 50 million tons. This means that every year a terminal like ours ought to be built. There is already a deficit for oil reloading. This leads to such transnational companies as YUKOS, LUKoil, Surgutneftegaz, TNK constructing oil pipelines to Murmansk port. A project like this would cost some 4 billion US dollars.  Further development will be impossible without additional oil pipeline and oil product reloading capacities. Therefore it occurred to us that a terminal could be built in Riga.      

Why Riga?

Firstly, Belarus has not yet privatized its oil refineries but is planning to attract Russian capital for privatization. Secondly, the distance from Novopolotsk to Tallinn or Butinge is nearly twice as long. Riga and the Riga free port are the closest. Of course, there's also Ventspils but its specialty is reloading crude oil supplied via pipeline. Meanwhile Riga terminals will specialize in oil product handling. There will be enough work for everyone. Tallinn has nine terminals and the tenth is under construction. Estonia reloads 32 million tons of oil products annually in absence of a pipeline. Latvia has a large terminal in Ventspils, but handles 1.5 times less.

What about economic feasibility?

Economics are simple and based on amounts of oil products reloaded. Upon initial planned reloading capacity of 10 million tons a year, it would be like this: 5 USD per ton would allow for annual revenues of 50 million USD. Of this, 20 million USD will be paid in taxes. Another 50 million USD will go to the railway as freight. Thus, 100 million USD will remain in Latvia every year. Naturally, this money will be spent on further development and environmental needs.

How do you propose to handle the investment side of the project?

We are not going to look for any investors. Of course, a 150 million USD project will require additional investment. Some smaller contributions will be made from our own funds but in general our project will be financed by a European bank. Negotiations are under way, and we have made a 99% agreement with a Scandinavian bank.  In fact, Sweden's NCC company has agreed to become the general contractor for the project, and if the contract is signed it will also procure a guarantee from the Swedish government.

What have your immediate competitors to say about  this?

Hidden competition is present in any business. The wholesale of oil products on the domestic market with such players as Shell, Neste, Lukoil, DINAZ, Viada, etc. is no exception. Oil terminal owners are very jealous about our project, although nobody has opposed it openly. The mass media and various political forces are put to work. The project also needs to be approved by authorities that are used as levers and tools, in particular, �the greens� - more so for their representation in the government.

The environment is always the most sensitive issue upon construction of oil terminals…

In principle, an oil terminal is an ecologically clean business. This is what experts say about terminals in Rotterdam, for example. Rotterdam port is situated just 1,5 kilometers from the city center, it reloads 300 million tons annually, including 150 million tons of oil and oil products. But water in the Rhine estuary - once the cesspool of Europe – now is one of the purest in the country. Or, let’s take the terminal in a small Spanish port of Tarragona rich in historic monuments. The terminal is large, also meant for reloading 10 million tons of oil products a year, with storage facilities for 350,000 cubic meters. So, Rotterdam or Tarragona can be taken as basic examples. We understand well that all the very strict EU requirements have to be met to ensure safety during construction and operation of the oil terminal. Money must be earned for environmental needs, and these things must be handled. 

When do you plan to start construction?

Commencement was planned in spring 2004 but because of obstruction by the greens we may have to move the schedule forward three or four months.

�The main thing is to find common ground with those fighting for environmental protection. Even assuming that the port in Riga is shut down for good, environmental problems will not get any less. There will be more and more of them with every year. The port and the city depend on each other. The city and the port must not be separated, they should be brought together. �

Hank de Bruin, director of physical and environmental planning at Rotterdam port.