UPDATE 1-Russia plans big boost to Primorsk diesel exports after 2016

Thu Mar 6, 2014 11:03am EST

Related Topics

* Transneft to adjust crude oil pipelines to carry diesel

* Pipeline capacity to Primorsk seen rising to 23 mln T in 2016 (Adds detail, quotes, trader comments)

By Vladimir Soldatkin

MOSCOW, March 6 (Reuters) - Russia's oil pipeline monopoly Transneft said on Thursday it plans to nearly triple diesel exports from the Baltic Sea port of Primorsk after 2016, when domestic companies are expected to boost production.

Transneft said in an email that pipeline capacity for ULSD diesel destined to Primorsk would total 23 million tonnes a year (470,000 barrel per day) after 2016, up from over 8 million tonnes currently.

As there will be not enough pipeline capacity to export the production then, Transneft said it will adjust one of the crude oil links leading to Primorsk to allow it to move ULSD.

It would use the crude pipelines of the Baltic Pipeline System (BTS) to ship ULSD to Primorsk. BTS-1 runs two parallel pipelines to Primorsk.

Transneft, which is also the main shareholder in Primorsk port, said that one of the pipelines of a smaller volume would be used for ULSD.

The sharp increase in ultra low sulphur diesel (ULSD) exports is bad news for Europe's refining sector that has seen profits hammered over the past year due to increasing imports of the motor fuel from Russia, the U.S. Gulf Coast and Asia.

Traders have said that increasing exports of diesel to Primorsk would lead to drying up of flows to other destinations, such as the Baltic port of Ust-Luga or Latvia's Ventspils.

"The new pipeline makes sense as all the dirty (heavy oil products) loading is going through Ust Luga now. This will take pressure off the idea of switching Ventspils to ULSD and at the same time keeps the business with Mother Russia," a trader said.

Russia has been decreasing crude oil exports as it modernises its oil refineries with a view to boosting high quality fuel to satisfy the demand of rising numbers of cars, and to stick to environmental standards.

The result of ensuring that motorists have enough premium gasoline to fuel Russia's growing fleet of Western-made cars will be a diesel surplus that could reach 65 million tonnes a year by 2020, Moscow's Skolkovo business school estimates.

Transneft would start works to transport ULSD from the Kirishi refinery, owned by Surgutneftegas, to Primorsk later this spring and the pipeline would be ready to ship the fuel next autumn or winter.

Another part of the plan to expand the capacity of oil products pipelines is to transform crude oil pipeline from Yaroslavl to Kirishi into a diesel link in 2016. (Reporting by Vladimir Soldatkin; additional reporting by Ron Busso in London, editing by Gabriela Baczynska and William Hardy)

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