dhyatt
02-03-2004, 11:43 AM
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Copyright 2003 World Markets Research Limited;
All Rights Reserved
Congestion in the Turkish Straits is continuing to cause delays to the southbound shipment of oil loaded at Russia's Novorossiisk port, prompting questions over how the anticipated increase in Azeri and Kazakh oil production in the medium term will be brought on to world markets.
Significance
Congestion is continuing to hamper the passage of oil tankers through the Bosphorus Straits due to a combination of severe weather factors and increased restrictions on tanker traffic through the Straits imposed by Turkish authorities.
Implications
Congestion through the Straits is likely to be exacerbated in coming years as Russia, Azerbaijan and Kazakhstan increase oil production and therefore exports.
Outlook
Azerbaijan especially, but also Russia appear more prepared to divert their increasing oil exports away from the Bosphorus in the medium term. Kazakhstan is being urged to consider alternative export routes for its oil.
Congestion through the Turkish Straits is delaying the southbound transit of tankers carrying oil from Russia, Kazakhstan and Azerbaijan by 11-13 days, reports Reuters Newswire, significantly more than the one-week backlog that had emerged when delays started around a month ago. Northbound tankers looking to pass through the Turkish Straits are still being delayed by up to two weeks. The delays increase the shipping costs of the oil as tanker rental rates soar, and also make it harder for refineries to implement their refining schedules efficiently.
Russia's Novorossiisk port, which exports around 900,000 bpd of Russian Urals Blend crude, has been closed periodically in the last month due to violent winter storms, but also because of the backlog of tankers seeking to exit the Black Sea via the Turkish Straits (see Russia: 1 December 2003: Transneft Halts Novorossiisk Loadings Due to Bosphorus Transit Delays and Turkey: 28 November 2003: Congestion in Bosphorus Delays Russian Oil). Now operating normally, the port has hiked scheduled loadings for January 2004 by 12% to catch up on export capacity that has been lost over the previous month, although Reuters Newswires reports scepticism among traders that the planned loadings will be achieved.
The delays have been caused by a combination of severe weather conditions impeding the transit of ships and tightened safety measures that have been put in place at the Turkish Straits. Expected delays due to gale force winds at Novorossiisk were compounded by severe fog around the Bosphorus last month, curtailing the loading of ships at the port and their passage through the Turkish Straits. New restrictions on the passage of ships through the Straits imposed by Turkish authorities for the purpose of protecting the environment and increasing safety precautions also play a part in delaying the transit of oil south to the Mediterranean Sea.
Navigating the windy and narrow Bosphorus Straits is fraught with difficulty. There have been 47 deaths as a result of collisions in the 17 years up to 1999, and in 1979 a tanker spilled 100,000 tonnes of oil into the Bosphorus, which is double the amount spilt by Exxon Valdez. In October 2002, Turkey placed new restrictions on oil tanker transit through the Bosphorus, including a ban on night-time transit for ships longer than 200 metres, a requirement that ships carrying dangerous cargo (including oil) request permission to transit 48 hours in advance; and a one-way traffic regulation on ships more than 250-300 metres long or carrying liquefied natural gas (LNG) or liquefied petroleum gas (LPG). In October 2003, a new US$40m surveillance system with 18 radar sites linked to control centres was unveiled. This will use information from sensors and global positioning satellites to guide ships through the Straits. In May 2003, Russia appealed to the UN-sponsored International Maritime Organisation (IMO) to call on the Turkish government to increase the flow of traffic through the Bosphorus. In its appeal to the IMO, Russia claimed that the measures taken by Turkey last year to limit traffic through the Straits were purposefully designed to increase costs for Russian oil tankers by slowing up the passage of ships (see Turkey: 30 May 2003: Russia Pressures Turkey over Bosphorus Transit). Under the Montreux Convention of 1936, commercial shipping has the right of free passage through the Bosphorus in peacetime. Turkey can only limit the passage of ships for safety and environmental purposes.
Outlook and Implications
Approximately 2.5m bpd of crude oil and petroleum product exports from Russia, Azerbaijan and Kazakhstan transit the Bosphorus Straits on a daily basis. The oil production, and therefore exports, of the three countries is set to increase significantly in the next decade as additional fields come onstream. How this oil will reach world markets is fast becoming a real issue, as the latest delays indicate that the Straits are already working to capacity. Azerbaijan is expected to divert the majority of its future oil output growth from having to transit the Straits as the Baku-Tbilisi-Ceyhan (BTC) pipeline comes onstream in late 2004. Russia is reluctant to scale down its dependence on the Straits but has nevertheless started boosting its oil exports via the Baltic Sea as it expands its port at Primorsk and the Baltic Pipeline System (BPS). Plans are under way to increase capacity at Primorsk and the connecting Baltic Pipeline System (BPS) to at least 840,000 bpd from the present 360,000 bpd. There are also plans to export Russian oil via the Adriatic Sea, as an alternative to the Black Sea, which is already working at full capacity. The Druzhba export pipeline that runs from Russia to Central Europe will be connected to the Adria pipeline, a 759-km line that currently transports oil from the Croatian port of Omisalj to refineries in Hungary, Slovakia and Slovenia.
Kazakhstan, however, is looking to increase its shipments via the Bosphorus as additional oil flows via the Caspian Pipeline Consortium's (CPC) Tengiz-Novorossiisk pipeline. Kazakhstan is anticipating a massive surge in oil production as the country's Caspian Sea development programme gets underway. The programme, which will start in 2004, is expected to increase the country's oil production to around 3.5m bpd by 2015. Turkey is firmly against an increase in oil through the CPC and is urging Kazakhstan to consider 'Bosphorus Bypass' pipelines. In June 2001, the US Trade and Development Agency awarded Kazakhstan a US$346,000 grant to facilitate a study of ways to export oil via a trans-Caspian link to Baku in Azerbaijan, where the oil could feed into the BTC pipeline. Russia has opposed trans-Caspian pipelines on environmental grounds, so barge links to the BTC appear to be the only option for Kazakh oil in this direction. Although the Kazakh government has expressed interest in sending early oil from the development of the Kashagan oilfield via the BTC, Kazakhstan has so far refrained from committing significant volumes to the BTC. Other options for Kazakhstan include the Odessa-Brody pipeline via Ukraine (already in place) and a potential Burgas-Alexandropoulous pipeline.
A transition away from the Turkish Straits is likely to be painful as pipelines mean construction costs and transit fees (under the Montreux Convention, Turkey does not receive transit fees from the vessels passing through the Straits), but transport costs through the Bosphorus will start to creep up as increased oil exports exacerbate congestion in coming years.
WMRC Contact Eral Yilmaz
*******************************************
Copyright 2003 World Markets Research Limited;
All Rights Reserved
Congestion in the Turkish Straits is continuing to cause delays to the southbound shipment of oil loaded at Russia's Novorossiisk port, prompting questions over how the anticipated increase in Azeri and Kazakh oil production in the medium term will be brought on to world markets.
Significance
Congestion is continuing to hamper the passage of oil tankers through the Bosphorus Straits due to a combination of severe weather factors and increased restrictions on tanker traffic through the Straits imposed by Turkish authorities.
Implications
Congestion through the Straits is likely to be exacerbated in coming years as Russia, Azerbaijan and Kazakhstan increase oil production and therefore exports.
Outlook
Azerbaijan especially, but also Russia appear more prepared to divert their increasing oil exports away from the Bosphorus in the medium term. Kazakhstan is being urged to consider alternative export routes for its oil.
Congestion through the Turkish Straits is delaying the southbound transit of tankers carrying oil from Russia, Kazakhstan and Azerbaijan by 11-13 days, reports Reuters Newswire, significantly more than the one-week backlog that had emerged when delays started around a month ago. Northbound tankers looking to pass through the Turkish Straits are still being delayed by up to two weeks. The delays increase the shipping costs of the oil as tanker rental rates soar, and also make it harder for refineries to implement their refining schedules efficiently.
Russia's Novorossiisk port, which exports around 900,000 bpd of Russian Urals Blend crude, has been closed periodically in the last month due to violent winter storms, but also because of the backlog of tankers seeking to exit the Black Sea via the Turkish Straits (see Russia: 1 December 2003: Transneft Halts Novorossiisk Loadings Due to Bosphorus Transit Delays and Turkey: 28 November 2003: Congestion in Bosphorus Delays Russian Oil). Now operating normally, the port has hiked scheduled loadings for January 2004 by 12% to catch up on export capacity that has been lost over the previous month, although Reuters Newswires reports scepticism among traders that the planned loadings will be achieved.
The delays have been caused by a combination of severe weather conditions impeding the transit of ships and tightened safety measures that have been put in place at the Turkish Straits. Expected delays due to gale force winds at Novorossiisk were compounded by severe fog around the Bosphorus last month, curtailing the loading of ships at the port and their passage through the Turkish Straits. New restrictions on the passage of ships through the Straits imposed by Turkish authorities for the purpose of protecting the environment and increasing safety precautions also play a part in delaying the transit of oil south to the Mediterranean Sea.
Navigating the windy and narrow Bosphorus Straits is fraught with difficulty. There have been 47 deaths as a result of collisions in the 17 years up to 1999, and in 1979 a tanker spilled 100,000 tonnes of oil into the Bosphorus, which is double the amount spilt by Exxon Valdez. In October 2002, Turkey placed new restrictions on oil tanker transit through the Bosphorus, including a ban on night-time transit for ships longer than 200 metres, a requirement that ships carrying dangerous cargo (including oil) request permission to transit 48 hours in advance; and a one-way traffic regulation on ships more than 250-300 metres long or carrying liquefied natural gas (LNG) or liquefied petroleum gas (LPG). In October 2003, a new US$40m surveillance system with 18 radar sites linked to control centres was unveiled. This will use information from sensors and global positioning satellites to guide ships through the Straits. In May 2003, Russia appealed to the UN-sponsored International Maritime Organisation (IMO) to call on the Turkish government to increase the flow of traffic through the Bosphorus. In its appeal to the IMO, Russia claimed that the measures taken by Turkey last year to limit traffic through the Straits were purposefully designed to increase costs for Russian oil tankers by slowing up the passage of ships (see Turkey: 30 May 2003: Russia Pressures Turkey over Bosphorus Transit). Under the Montreux Convention of 1936, commercial shipping has the right of free passage through the Bosphorus in peacetime. Turkey can only limit the passage of ships for safety and environmental purposes.
Outlook and Implications
Approximately 2.5m bpd of crude oil and petroleum product exports from Russia, Azerbaijan and Kazakhstan transit the Bosphorus Straits on a daily basis. The oil production, and therefore exports, of the three countries is set to increase significantly in the next decade as additional fields come onstream. How this oil will reach world markets is fast becoming a real issue, as the latest delays indicate that the Straits are already working to capacity. Azerbaijan is expected to divert the majority of its future oil output growth from having to transit the Straits as the Baku-Tbilisi-Ceyhan (BTC) pipeline comes onstream in late 2004. Russia is reluctant to scale down its dependence on the Straits but has nevertheless started boosting its oil exports via the Baltic Sea as it expands its port at Primorsk and the Baltic Pipeline System (BPS). Plans are under way to increase capacity at Primorsk and the connecting Baltic Pipeline System (BPS) to at least 840,000 bpd from the present 360,000 bpd. There are also plans to export Russian oil via the Adriatic Sea, as an alternative to the Black Sea, which is already working at full capacity. The Druzhba export pipeline that runs from Russia to Central Europe will be connected to the Adria pipeline, a 759-km line that currently transports oil from the Croatian port of Omisalj to refineries in Hungary, Slovakia and Slovenia.
Kazakhstan, however, is looking to increase its shipments via the Bosphorus as additional oil flows via the Caspian Pipeline Consortium's (CPC) Tengiz-Novorossiisk pipeline. Kazakhstan is anticipating a massive surge in oil production as the country's Caspian Sea development programme gets underway. The programme, which will start in 2004, is expected to increase the country's oil production to around 3.5m bpd by 2015. Turkey is firmly against an increase in oil through the CPC and is urging Kazakhstan to consider 'Bosphorus Bypass' pipelines. In June 2001, the US Trade and Development Agency awarded Kazakhstan a US$346,000 grant to facilitate a study of ways to export oil via a trans-Caspian link to Baku in Azerbaijan, where the oil could feed into the BTC pipeline. Russia has opposed trans-Caspian pipelines on environmental grounds, so barge links to the BTC appear to be the only option for Kazakh oil in this direction. Although the Kazakh government has expressed interest in sending early oil from the development of the Kashagan oilfield via the BTC, Kazakhstan has so far refrained from committing significant volumes to the BTC. Other options for Kazakhstan include the Odessa-Brody pipeline via Ukraine (already in place) and a potential Burgas-Alexandropoulous pipeline.
A transition away from the Turkish Straits is likely to be painful as pipelines mean construction costs and transit fees (under the Montreux Convention, Turkey does not receive transit fees from the vessels passing through the Straits), but transport costs through the Bosphorus will start to creep up as increased oil exports exacerbate congestion in coming years.
WMRC Contact Eral Yilmaz