Russian oil export hindered by capacity restraints? – IEA

According to the February IEA monthly oil market report, plans by Russian oil producers to increase oil production also in 2003 may become restrained if export capacity cannot be freed up. The recent weather delays and political bottlenecks together with three successive months of falling exports had led to speculation concerning outlets for a potential production increase. IEA estimate that 2003 Russian oil production may grow by 6% (0.5 mbd).

The Russian government’s has refused to allow pipeline shipments during the first quarter of 2003 through Latvia to the port of Ventspills. In 2002 Ventspills exports halved to 0.15 mbd with the opening of Russia’s 0.26 mbd Primorsk terminal.

Potential outlets for extra Russian oil exports in 2003 include:
*Re-opening of Ventspills in April +0.1 mbd
*Druzba pipeline to the Croatian Adriatic mid 2003 +0.1 mbd
*Reversal of the Brody to Yuzhny/Odessa pipeline from February +0.065 mbd
*Expansion of the Baltic Pipeline system to Primorsk +0.03 mbd (capacity for 2004 could be 0.36 mbd)
*The plan to boost supplies through the Druzba pipeline to Hungary and the Czech and Slovak republics by 0.3 mbd seems questionable in terms of local demand according to IEA.
*In addition to a few small crude swap agreements in the East of Russia, Yukos plans for rail deliveries of 0.1 mbd to China.

Looking at the above potential for extra outlet it may cover 0.4 mbd of the estimated production increase of 0.5 mbd. Russian domestic demand may only grow by 0.05 mbd in 2003. IEA note that longer term Russian production growth could be curtailed by real export constraints.

The total world oil supply and demand development can be viewed on here.

FSU oil exports development can be viewed here.