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Russia ramps up motor fuel sales to Ukraine, regardless of conflict
June 8, 2015 / 1:52 PM / 3 years ago

Russia ramps up motor fuel sales to Ukraine, regardless of conflict

By Damir Khalmetov and Anna Bondarenko
    MOSCOW, June 8 (Reuters) - Russian companies, spurred by healthy
profits, have sharply raised sales of vital motor fuel to Ukraine this
year, while at the same time also supplying the area of the country held by
pro-Moscow separatists.
    Liquefied Petroleum Gas (LPG) use in Ukraine as a much cheaper
alternative to gasoline rose 17 percent in 2014 from the previous year.
Ukraine is now heavily dependant for LPG on Russia, which has overtaken
Kazakhstan as its main supplier. Despite the conflict in east Ukraine,
trade continues, albeit with friction, as Kiev is reliant on Russian gas
and exports agricultural commodities to its neighbour. 
    LPG exports from Russia to Ukraine, including the self-proclaimed
Donetsk People's Republic (DNR) and Luhansk People's Republic (LNR) held by
the separatists, rose by 72 percent from January to April 2015,
calculations by Reuters showed. 
    Sales totalled 106,522 tonnes compared with 61,810 tonnes in the same
period last year, according to the calculations, based on customs
    Western governments have imposed sanctions on Moscow over the conflict
in Ukraine but the companies that supply LPG to Ukraine say their
operations are lawful.
    "The policy of every company is: 'You can postpone a war, but never a
lunch'," said one of the traders. "No one is going to let go of their
    The main LPG exporters from Russia are: Rosneft - 58 percent
of total volume, Gazprom - 16 percent, United Petrochemical
Company, owned by Bashneft, - 13 percent, Sibur - 5.0
percent, TAIF-NK, Surgutneftegas and Forteinvest - 2 percent each.
    A Sibur subsidiary, Sibur International, made railroad LPG shipments to
Ukraine in January - February 2015, but the company does not think
increased LPG supplies to Ukraine is a trend.
    "Recent LPG supplies to Ukraine (sale at the border) were in January -
February 2015. Ownership of the product passed from Sibur to buyers on the
Russian-Ukrainian border," Sibur's press service said, adding that the
customers were then in charge of transportation and delivery to terminals
on Ukrainian soil.
    Gazprom, Rosneft and Bashneft could not be reached for comment.
    LPG shipments by oil tank trucks through Russian road checkpoints at
Gukovo and Donetsk began in winter 2015, according to reports from the
Organization for Security and Cooperation in Europe (OSCE).
    "(OSCE) observers saw oil tank trucks, with the Russian inscriptions
'propane' and 'flammable'," that crossed the border in both directions
through both road checkpoints," starting at the beginning of February this
year, according to OSCE reports.
    LPG supply by oil tank truck shipments from Russia to Donetsk and to
Luhansk provinces (including DPR and LPR) began in late 2014 and increased
in January - April 2015, according to Russian customs statistics. 
    The volumes were: 148 tonnes in January, 1,444 tonnes in February,
2,612 tonnes in March and 3,262 tonnes in April.
    LPG export shipments in oil tank trucks from the Rostov and Belgorod
regions to the Donetsk and Luhansk provinces (including the DNR and LNR)
were about 7,500 tonnes in January - April 2015 vs about 150 tonnes in
2014, according to the Reuters data.
    LPG supplies to Donetsk and Lugansk are attractive due to the high
propane prices at fuel filling stations in the regions compared to the
nearby Russian region of Rostov - 24 roubles a litre compared to 16 roubles
a litre, market participants said.
    In addition, LPG supplies to the DNR and LNR from within Ukraine have
been blocked and some of the largest fuel filling networks, such as
Parallel, is not operating, pushing prices up further at fuel filling
    "Only a few stations are working. Yes, the major networks have closed,
but some fuel stations work," said one market participant.
    Russian exporters have supplied LPG from Russia to the Donetsk and
Luhansk regions through little-known intermediary companies. 
    The main volume of shipments comes from Gazprom (Orenburg GTP, Surgut
CSP and Astrakhan GPP) - 47 percent; Sibur (Tobolskneftehim and
Nyagangazpererabotka) - 28 percent; Surgutneftegaz (Surgut UPG) and Rosneft
(Ryazan Refinery, Novokuibyshevskaya petrochemical company and Zaikinskiy
GPP) each have 13 and 10 percent respectively.
    Payments between the contracting parties take place in cash in Russian
roubles and LPG transportation is handled by Russian and Ukrainian oil tank
trucks, according to market participants.
    Russian suppliers, attracted by the high-yield Ukrainian market, have
been competing with firms from Belarus and Kazakhstan, their partners in a
customs union. 
    Belarus and Kazakhstan's share in LPG supply to Ukraine in 2014 dropped
dramatically. Kazakhstan's share fell to 34 percent (164,000 tonnes) from
41 percent and Belarus' share sank to 15 percent (72,000 tonnes) from 22
percent in 2013 respectively.
    Their share was filled by Russian companies, particularly Rosneft
(notably the Novokuibyshevskaya petrochemical company) and United
Petrochemical Company (UPC) plants, owned by Bashneft and Gazprom.
    LPG railway supplies from Russia to the domestic Ukrainian market went
through the following border crossings, according to Russian railway data):
  ·  Solovey (Belgorod region, Russia)/Topoli (Kharkov region, Ukraine) -
65 percent of total rail supply;
  ·  Suzemka (Bryansk region, Russia)/Zernovo (Sumy region, Ukraine) - 31
  ·  Krasniy Hutor (Belgorod region, Russia)/Kazachia Lopan (Kharkov
region, Ukraine) - 4.0 percent.
    Last year, small amounts of liquefied natural gas were supplied to
Ukraine through the Uspenskaya border crossing (Russia's Rostov region ) /
Kvashino  Ukraine's Donetsk region), but the crossing stopped working in
the middle of 2014.
    The Donetsk and Luhansk regions, which include areas under the control
of the DPR and the LPR, consumes 200,000 - 250,000 tonnes of LPG per year,
traders estimated.
    Below, a table of LPG exports from Russia to Ukraine divided by type of
liquefied gas (according to the Russian customs data, in tonnes):
                             Jan-Apr    Jan-Apr     Jan-Dec           ±, % 
                                2015       2014        2014   Jan-Apr 15/14
 Propane-butane mix           48,058      36,17     104,081             33%
 Propane technical            33,408     14,572      42,294            129%
 Propane fraction             13,715       7,44      29,429             84%
 Butane fraction               3,168      1,891      37,915             67%
 Isobutane                     5,738      1,043      17,891            450%
 Butane technical                667          -        5,93               -
 Propane-butane for            1,766        694       3,405            155%
 Butane-butylene                   -          -       1,395               -
 Propane for automobile            -          -         802               -
 Others                            1          -           -               -
 Total:                      106,522      61,81     243,141             72%

 (Editing by Gleb Gorodyankin and William Hardy)

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