Kazakhstan to divert fuel oil exports away from Estonia

Apr 23. Baltic Business News

By Toomas Hõbemägi

Kazakhstan to divert fuel oil exports away from EstoniaKazakhstan plans to start fuel oil exports from Georgia’s Batumi terminal in May, diverting some 700,000 tonnes from Baltic Sea ports, mainly in Estonia, by the year-end as it seeks to cut its costs and transit risks, Äripäev reported with reference to Reuters.

Kazakhstan has faced increasing competition from Russian oil product suppliers in the Baltic Sea ports, including Ust-Luga and Novorossiisk in the Black Sea.

There is also uncertainty over the tax regime in a Moscow-led customs union, to which the Central Asian country belongs. Russia plans to hike the duty on fuel oil exports from 2015. The Batumi terminal is operated by Kazakh state energy company KazMunaiGas. It is being modernised to be able to handle 80,000-tonne tankers, compared to 40,000-tonne tankers currently.

Thanks to the expansion, profitability has increased, adding the first tanker was expected on May 23-38. Last year, Kazakhstan produced 3.7 million tonnes (75,000 barrels per day) of fuel oil, of which 3 million tonnes it exported, mainly via the Baltic Sea ports.

Viktor Palmet, head of the Estonian Ports Association, said that it was difficult to comment the news report and its possible impact on Estonian oil transit trade.

“Also, oil transit takes place between companies and not between countries so I cannot understand what you mean if you say that Kazakhstan has decided to divert its oil transit away from Estonia,” said Palmet.

Palmet said that the decision may be linked to the location of end customers. “If the end buyers of the specific company are located far from Estonia, it may be more profitable for them to ship oil through Batumi or Black Sea rather than Baltic Sea,” added Palmet.

Also a representative of the Estonian Ministry of Economic Affairs said that too little was known about the decision to estimate its possible impact on Estonian economy and transit trade.