MOSCOW/MINSK (Reuters) - Fed up with oysters and camambert from Belarus? Minsk is developing a more serious business by re-exporting Russian liquefied petroleum gas.
After Western sanctions were introduced against Moscow in 2014, Russia banned imports of fresh food products from Europe and Belarus become the supposed homeland for oysters and premium cheese so that local traders could export such goods to Russia. This year Belarus also turned into a huge exporter of liquefied petroleum gas (LPG) to neighbouring Ukraine and Poland.
Russian tensions with Ukraine and the West help Minsk work with Moscow and European states, gaining additional profit as a trade mediator and a way to gain access to the Eurasian Economic Union.
Belarus became the leader this year in Russian LPG rail import, but the growth in supply is triggered not by a steep surge in domestic demand, but by profit from LPG re-export beyond the boundaries of the Eurasian Economic Union.
Belarus ranked only fourth, behind Poland, Ukraine and Finland, in LPG supplies from Russia by land until 2017.
LPG, or propane and butane, is usually cheaper than many other kinds of fuel, such as gasoline. It can be used in cars, household utilities, as a feedstock in petrochemical industry and to produce electric power.
In 2017, LPG exports from Belarus grew to 637,000 tonnes from 436,000 tonnes in 2016, according to the local statistics service. At the same time, domestic demand stayed almost unchanged at 145,000 tonnes last year, Joint Organisations Data Initiative (JODI) figures showed.
Russia raised LPG rail exports to Belarus to a record high in May 2018, outpacing Poland which is the main consumer of Russian LPG, traders’ data and statistics showed.
Rail LPG shipments from Russia to Belarus in May 2018 amounted to 107,375 tonnes compared to 86,220 tonnes shipped to Poland, while Russia delivered 44,998 tonnes to Belarus on June 1-18 and 43,738 tonnes to Poland.
LPG rail exports from Russia to Belarus in the second half of 2017 grew by 60 percent to 56,000 tonnes per month compared to the first half of the same year when it was 35,000 tonnes. Deliveries grew by 41 percent to 79,000 tonnes per month, statistics showed.
In comparison, average monthly LPG exports from Russia to Belarus in 2015-2016 were about 20,000 tonnes.
Belarusian LPG volumes transported to Belarus are stored at Belarus dispensing stations and then re-exported to Ukraine, Poland and other countries in Eastern Europe.
In the second half of 2017, Russian producers used Belarusian dispensing stations as a gas distribution hub to deliver fuel mainly to the Ukrainian market. Russian LPG exporter Sibur then started to use these stations for re-exports of liquefied gas to Poland in the first half of this year.
Russian producers started increasing LPG supplies to Belarus for further re-export, mainly to Ukraine, in the second half of 2017 when Russia’s Federal Agency for Technical and Export Control (FSTEC) put in place a procedure for obtaining a special permit for direct LPG supplies from Russia to Ukraine from May 1, 2017.
Only one large producer, Rosneft, has obtained a FSTEC special permit so far, traders reported. The company is directly supplying about 40,000 tonnes of LPG to Ukraine per month. Others had to go via Belarus instead. That was mainly dispensing stations in Vitebsk region, Belarus, where LPG can be stored or transhipped. More than 70 percent of LPG volumes goes through a station owned by the firm Transexpeditsiya.
“Russian companies either register here (in Belarus), or work through Belarusian companies to avoid sanctions. It allows them to supply LPG to Ukraine,” said one trader in the LPG market. Transexpeditsiya said it would not comment after a request for a comment from Reuters.
Russia’s top petrochemical producer Sibur has been actively involved in LPG re-exports through Belarusian dispensing stations since last autumn.
However, the company doesn’t supply liquefied gas through Belarus to Ukraine, as most other producers do, but uses Belarusian dispensing stations for exports to Poland and other Eastern European countries.
In 2015-2016 and in the first half of 2017, Sibur’s shipments to Vitba station in Belarus were episodic and not more than 1,500 tonnes per month. Shipments became regular in the second half of 2017 reaching 15,000 tonnes per month before rising to 32,000 tonnes per month in January-May this year.
Sibur declined to comment on the rise in export shipments to Belarus.
Sibur started LPG shipments from Tobolsk to Lyshitsy station in the Brest region in Belarus in autumn 2017, where there is a dispensing station which can load gas into narrow gauge tank cars for further deliveries to end-users in Poland.
At the end of last year, Sibur shipped about 2,500-3,000 tonnes of LPG per month to the Lyshitsy station with deliveries climbing this year to 6,500-7,000 tonnes per month.
When the main gas distribution hub at Vitba station, which is owned by Transexpeditsiya, redirected supplies to Poland, the prospect of additional income on shipments of Russian LPG to Ukraine through Belarus contributed to the revival and construction of several new dispensing stations.
Private company Chess-Bel, which is located near Transexpeditsiya’s gas distribution hub, re-equipped part of the tank farm on its own oil base for storage and transshipment of LPG, traders said.
Additional reporting by Natalia Savrasova in MOSCOW and Andrei Makhovsky in MINSK. Writing by Anna Bakhtina and Tatiana Vodianina. Editing by Kevin O'Flynn