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LUKoil behind drop in oil supplies to Germany – experts

A recent drop in Russian oil supplies to Germany is not due to pipeline network problems, but down to undersupply by private companies, state oil transporter Transneft said Friday.

German media earlier reported a drop in the volume of Russian oil deliveries via the Druzhba (Friendship) oil pipeline network, the second case in the last eight months, which it attributed to problems in the pipe system. “The decrease was not due to Transneft,” Transneft Vice President Sergei Grigoryev said. Russia’s largest independent oil producer LUKoil “delivered about one third less, while a number of small companies stopped supplying crude to Germany.”

The Druzhba pipeline network was built in the 1960s to pump oil from central Russia to Europe. The pipeline starts in the Samara Region, and divides into two branches. The southern branch pumps crude via Ukraine, while the northern branch passes through Belarus, and then on to Germany via Poland. Experts said the decline in LUKoil’s crude shipments to Germany could be due to the company’s conflict with traders supplying oil to the German market.

Valery Nesterov, an analyst with Troika Dialog, said LUKoil has sought to cut out the middleman to supply crude directly to German oil refineries, recalling the company’s reported conflict with oil trader Sunimex Handels. Maxim Shein, head of the analysis department at BrokerKreditServis, said there are no objective reasons for the drop in supplies on such a large scale, agreeing that a conflict with an oil trader was the most likely cause. “It is very difficult to enter the European market. Perhaps LUKoil is pushing to secure a foothold,” he said. (