Switzerland-based oil trader Mercuria replaced Russian oil with Iranian one

Shazand Petrochemical Company, Arak, Iran (Miladfarhani, CC)

As Poland looks to lower its dependence on Russian supplies, the move adds greater competition to the local and regional markets. Polish refiner Lotos has bought 2 million barrels of oil from National Iranian Oil Company (NIOC) and the cargo arrived in Gdańsk in August.

Urals has lost its position on the Polish market in the past year due to the increased activity of Middle Eastern producers, which boosted supplies to the Baltic Sea area, forcing Russian companies to cut prices. The considerable reduction of pipeline oil prices in Poland since the start of 2016, combined with Gdańsk imports, has squeezed out Mercuria’s supplies.

Mercuria had a leading position on the Polish oil market for several years. It bought Urals pipeline supplies, provided by Russian producers through the Druzhba oil pipeline system, under long-term contracts and then resold the oil to Polish refiners PKN Orlen and Grupa Lotos.

Rosneft and Tatneft were the major suppliers of Urals pipeline supplies to Poland this year. The companies supplied crude oil under direct contracts with PKN Orlen and Grupa Lotos.

Rosneft has a contract to supply 25.2 million tons of Urals to PKN Orlen between 2016 and 2019. Rosneft also has a contract with Lotos to supply 2.7 million tons of Urals per year until the end of 2017. Tatneft’s contract is for the supply of 100,000-200,000 tons a month of Urals to PKN Orlen and up to 200,000 tons to Grupa Lotos.

In June, Rosneft and PKN Orlen signed a contract for the supply of up to 15.8 million tons of oil to the Czech Republic, which receives oil through the southern branch of the Druzhba oil pipeline, from July 2016 and June 2019.

In late 2015, Surgutneftegaz signed a contract with Mercuria on oil supplies to Poland in 2016, with the volume planned at the 2015 level of about 3.6 million tons. However, lower purchasing prices from Polish refiners forced Mercuria to cancel its only oil contract with Surgutneftegaz in 2016.

Saudi Arabia, the world’s largest oil producer, started supplies of crude oil to Poland at the end of September 2015. The volume and range of imported crude grades have only increased since then.

In April this year, Gdańsk’s tank farm capacity, owned by PERN, increased from 300,000 to 677,000 cubic meters. Petroineos, Shell and Total have leased tanks in the port, said traders

Lotos representative Marcin Zachowicz said the first shipment of Iranian oil was a test. The resulting materials will be recycled separately to obtain detailed technical characteristics on the basis of which will assess the economic feasibility of further purchases.

Volumes of test deliver enough for the production of 61.5 million liters of gasoline and 116 million liters of diesel fuel. This is sufficient for simultaneous full charging of the 3.2 million passenger cars – that is, all registered in the Mazowieckie province – the most densely populated in Poland.

In January “Rosneft” achieved the renewal of existing agreements on oil supplies to Poland. A contract with Grupa Lotos was extended for two years, and the volume of supplies was increased to 2.7 million tons per year (54 thousand barrels per day). At the end of December “Rosneft” extended the contract with the Polish PKN Orlen until the end of 2019, increasing the supply volume to 25.2 million tons.

The average price of Urals in January-July of 2016 accounted for 38.68 per barrel, which is about 1.5 times lower compared to the same period last year.

Russia intends to fight for its share on the European oil market, said Rosneft head Igor Sechin, with „flexibility and ingenuity”, even if it means increased discounts for Urals. The head of “Rosneft” Igor Sechin and Russian energy Minister Alexander Novak have accused Riyadh of dumping. Suppliers of Russian oil had to increase their discounts almost twice the discount of oil from Russia to Brent, as a rule not exceeding USD1-2 rose to 3.8 per USD.

Shazand Petrochemical Company, Arak, Iran (Miladfarhani, CC)

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