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Friday, September 21, 2018

Double hull tankers increase their share of Russia’s booming oil exports

Today’s high oil prices demonstrate the tight supply of oil and volatile situation in a number of producing countries. However the world has so far been spared a third oil crisis by the increase in oil exports from Russia.

Strong increase in exports

Total petroleum exports from the Former Soviet Union (FSU) have grown from 2.4 mbd in 1994 to 7.5 mbd in 2004. Crude oil exports’ share of the total has declined from 79% in 1994 to 69% Jan-Aug. 2004. The current product share of 31% is anticipated to continue to increase to circumvent the crude oil export bottlenecks. The above graph shows that exports from the FSU have covered a large part of the increasing world oil demand, up to 97% in 2000. In 2002 the FSU export increase was higher than the increase in world oil demand, meaning that Russia took market share from other exporters.

In the spring of 2003 the Russian government approved an energy strategy for the country until 2020 in which it was said that amid a combination of favourable domestic and external conditions, oil production could potentially reach 490 million tonnes (m ts) in 2010 and 520 m ts in 2020. However according to a more conservative forecast, production would be 450 m ts in 2020. Using a pessimistic forecast, oil production will increase only for the next couple of years and will then decline to 360 million ts in 2010 and 315 m ts in 2020.

Crude oil production in 2003 was, according to the BP Review, 421 m ts. Oil production will continue to develop in both traditional oil-producing regions such as Western Siberia, the Volga region, and North Caucasus, and in the oil and gas provinces in the north (Timan-Pechora), Eastern Siberia, and the Far East. The main task in developing the oil industry will be to expand oil exports in the period to 2010 and then stabilise them by expanding the presence of Russian oil companies in foreign markets.

It used to be said that oil from Russia was short-haul oil that came at the expense of increased long-haul oil from the Middle East. In the last couple of years extra supply from Russia and neighbouring countries has in fact added to the demand for tankers.


Looking at this graph, the FSU is clearly the second largest crude oil exporter in the world after Saudi Arabia, with supplies in recent years mainly originating from the Black Sea, the Baltic Sea and via the Druzhba Pipeline to Eastern Europe (see graph below).

In 1994, 43% or 1.0 mbd was exported from the Black Sea, 23% or 0.6 mbd from the Baltic Sea, 34% or 0.9 mbd via the Druzhba Pipeline, and nothing from “other” areas.

In 2004 38% or 2.8 mbd was exported from the Black Sea, 31% or 3.1 mbd from the Baltic Sea, 14% or 1.1 mbd via the Druzhba Pipeline, and 7% or 0.5 mbd from “other” areas including Sakhalin and the Northern area. 90% of these exports went to Europe and the rest mainly to North America and China.

The main scheme to continue the expansion of Russia’s export infrastructure involves further capacity increases in the Baltic Pipeline System and its port of Primorsk, from today’s 1 mbd to 1.2 mbd. According to Russia’s Energy Minister Victor Khristenko, this expansion could be achieved by the beginning of 2006, if the government gives the green light.

Safety performance high

Oil from Russia is transported through quite sensitive areas such as the narrow sounds between the Baltic Sea and Kattegatt, the BosporusStraits and from the Russian Barents Sea. The last couple of years have seen a number of tanker groundings (panamax and handy/MR sizes) in and around the Danish Straits, with many of the tankers involved carrying heavier grade cargoes, but there has been no pollution.

Two recent grounding tanker incidents off Denmark have once again drawn attention to the safety of exports from the Baltic region. Fortunately these two incidents did not cause any pollution or other major damage. The tankers involved were modern double hull vessels. One of the tankers is said to have been navigating outside a 700 metre wide navigation channel, the other is said to have lost power.


Contrary to opinions expressed recently in the press over the quality of tanker tonnage used to carry Russia’s oil exports, the tanker trade out of the Baltic and the Black Sea has been rapidly switching to double hull tankers. According to figures from Fearnleys, the proportion of double hull tankers for the trade from the Baltic has increased from 42% in the first quarter 2000 (1Q00) to 95% 1Q04 for tankers above 50,000 dwt. The remainder are double bottomed or double sided. The proportion of double hulled tankers for the trade from the Black Sea has also increased significantly from 22% in 1Q00 to 76% in 1Q04 for tankers above 50,000 dwt. Some 5% were double bottomed or double sided in 1Q04 and only 19% were single hulled in this trade.


The oil exported from the FSU mainly goes to Europe. The green area of the graph above is seaborne trade going to OECD Europe, the yellow area comprises mainly pipeline exports to Eastern Europe.


There has naturally also been much focus on the safety of navigation through the narrow waters of the Bosporus and Dardanelles. Going through all reported incidents since 1978 and until 1999 there were several incidents in the Bosporus and Dardanelles, but some 75% were characterised as not serious and there have been few involving pollution.

The most serious accident was in 1979 when the Rumanian tanker Independenta was hit by a Greek cargo ship at the entrance of the Bosporus, caught fire and exploded. More than 40 people were killed and 95,000 tonnes of oil was spilt. A total of some 50,000 tonnes was later spilt in connection with 14 incidents in this area. The most serious was the Greek Cypriot tanker Nassia in 1994, resulting in over 30 deaths and an oil slick of 20,000 ts that burned for 5 days. The latest larger incident involved a Volgoneft tanker which in 2001 spilt some 4,700 tonnes. The graph above shows that the number of incidents declined dramatically after 2000.


The total number of tanker incidents has also  reduced in a big way over the last few years (see graph immediately above) despite significant increases in tanker activity (see oil exports graphs above).

Contact: Erik Ranheim