March 25 2022
The US has imposed an embargo on Russian oil imports. Deliveries to the EU countries in the near future are under a big question. However, Russian exports to other destinations have already started to grow. For example, this week Indian Nayara Energy oil refiner acquired Russian oil after a year-long hiatus, having bought about 1.8 million barrels of Urals oil from Trafigura trader.
Apparently, the countries that have not imposed sanctions against Russia will buy more of its oil. The obvious options for increasing flows are China and India. However, such a solution would require China to be ready to enter into the conflict with Western countries. The alternative is India, which is already increasing purchases of Russian oil. However, when supply flows change, inevitable difficulties will arise due to the limited capacity of the Eastern Siberia-Pacific Ocean oil pipeline and a significant increase in the cost of freight for transportation from ports in the European part of Russia. The redirection of Russian oil supplies from Europe to the Asia-Pacific region will double the average delivery time (from 15 to about 30 days), which will increase the need for tankers. The Russian fleet is able to independently provide only about a third of the sea transportation of oil and oil products. Russian tankers are more suitable for the transportation of crude oil. As for petroleum products, its fleet can transport only 17% of total exports. Due to the fact that Russian refineries are located mainly in the European part of the country, transporting oil products by tankers is more expensive than transporting crude oil, and therefore it is more difficult to redirect gasoline and fuel oil to Asian markets.
The search for new markets in this case will not be a problem: the most significant increase in demand for crude oil in the coming years is expected in Asia, primarily in China and the developing countries of the region. However, it will take some time to reorient the Russian oil industry to the east. In the short term the conclusion of new supply contracts, solving logistics issues and chartering tankers is expected, in the longer term, the implementation of new pipeline projects is considered.
Source: PortNews.ru