November 25, 2011 / 5:42 PM / 7 years ago

Exclusive - Russia delays damaged Ust-Luga oil port launch

MOSCOW (Reuters) - Russia postponed the opening of its Ust-Luga Baltic oil terminal until next year, industry sources said on Friday, days after the country’s safety watchdog said the port was so badly damaged by landslips it risked a serious environmental accident.

The terminal, expected to handle 10 million-20 million tonnes in 2012, is meant to let Moscow export crude directly to Europe, undercutting the negotiating power of countries with transit pipelines like Ukraine.

“The launch was postponed to the end of the first quarter,” said one industry source with knowledge of a meeting on Friday, called by Deputy Prime Minister Igor Sechin, to discuss the future of the terminal, which had until recently been expected to open on November 30 or in mid-December.

Another source on Friday put the potential opening date a bit earlier. “It’s February”.

Earlier this week the head of Russia’s industrial safety regulator Rostekhnadzor told Russia’s in a letter, seen by Reuters, that as of November 16, the port’s quayside had been mauled by three major landslips of the shore into the sea.

The watchdog’s head, Nikolai Kutyin, wrote that it saw a danger of “an accident while using this object, with heavy economic and ecological consequences”.

A spokesman for Russia’s oil pipeline monopoly Transneft, responsible for oil supplies to the port, declined to comment.

Oil traders have been closely watching development at the terminal, which will handle oil from the newly built Baltic Pipeline System (BTS-2) pipeline.

Delays to its launch have boosted bullish sentiment on the Russian Urals crude market this month and the grade from the world’s largest oil producer is now enjoying its longest rally on record, also buoyed by fears of disruptions to Iranian supplies.

Last week, the head Transneft told reporters that Ust-Luga will load its first crude oil cargo on December 15-20.

He said that the terminal was expected to ship 20 million tonnes of crude in 2012, while last month a company spokesman said the shipments could total as little as 10 million tonnes.

An industry source told Reuters on Friday a first cargo, of 100,000 tonnes of crude oil, would be shipped by the end of the year from Ust-Luga, but the port would then suspend oil handling.

Trade and industry sources had already said possible infrastructure problems at Ust-Luga could delay its first crude loading for an undetermined period.

Russia, the world’s No. 2 oil exporter after Saudi Arabia, wants to bypass the countries that stand between its abundant oil and gas reserves and customers in Europe after arguing with both Ukraine and Belarus over transit terms in recent years.

The BTS-2 pipeline was first mooted after a transit dispute with Belarus in 2005-2006.

Russia exports around half of its crude oil production, which last month reached a post-Soviet high of 10.34 million barrels per day.

Reporting by Gleb Stolyarov; additional reporting by Dmitry Zhdannikov in London and Denis Pinchuk in Moscow; writing by Vladimir Soldatkin; editing by Anthony Barker

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