TALLINN - The mooring this week of the largest tanker ever to a Baltic port signaled the strong position of Baltic ports for an increasingly export-minded Russia.
Despite the increased capacity of the Primorsk oil terminal and the planned creation of the Western Siberia-Murmansk pipeline, Russia will still need the services of ports of the three Baltic republics to cope with growing oil transit, Estonia's transport and transit officials said.
"In February 2003 Transneft announced that by 2012 oil extraction would increase to 500 million tons per year even if no new oilfields were discovered. [In that case] Russia will inevitably need to use foreign ports to cater to its oil transit needs," said Anu Hallik-Jurgenstein, spokesperson for the Ministry of Economic Affairs and Communications.
And given its price level and quality of service, the port of Tallinn can successfully compete with the Russian ports for the transit of crude oil, according to Hallik-Jurgenstein.
However, there is a catch.
"The only factor that makes [Russian ports] a little more competitive is the railway transportation rates," she said. "However, Russia's Ministry of Transportation has already announced that due to the pressure from [the World Trade Organization] the rates will be changed."
For Estonia the issue has tremendous economic importance. From 1994 to 2002 the transit of goods through Estonian ports has grown from 8.7 million tons to 33.6 million tons. According to the country's Economy Ministry, crude oil and oil products accounted for about 84 percent of the total transit via Estonian ports in the last several years.
"It's essential to notice that representatives of the Russian government emphasize the need to avoid Russian oil transit through the ports of the Baltic countries and Ukraine and to redirect the transit to Russia's own ports," Hallik-Jurgenstein said.
She added the logistical scheme of Russia's oil exports is about to change and that railway transportation will be used more. From the standpoint of Estonian transit companies, this could be a positive development.
In November 2002 Russia's largest oil producers Yukos, Sibneft and Tyumen Oil Company signed a memorandum of understanding on the Murmansk pipeline system. The deep water, ice-free port of Murmansk is considered an attractive option for shipping oil to North America via supertankers, a low-cost form of transport.
With an anticipated annual capacity of 80 million tons, the Western Siberia-Murmansk pipeline could be ready by as early as 2007.
Capacity of the Primorsk oil export terminal on the Gulf of Finland, which is owned and operated by Transneft, was increased in July 2003 to 18 million tons a year, and there are plans to increase it to a staggering 40 million tons.
Despite the plans of these oil producers, Sten Aamer, boardmember of Estonian Oil Service, described the current situation with Russian oil transit as quite favorable and once again confirmed "there will be enough oil for everyone."
"Oil extraction in Russia is growing. Production of crude oil has grown 25 percent from 2001 to 2002. For the U.S. market, Russian oil is a favorable alternative to the oil from the Middle East," said Aamer.
Russia currently exports about 166 million tons of oil per year, or 40 percent of total oil extracted. If the situation in the Middle East becomes more peaceful and the crude oil price decreases, Russia's crude oil pipeline will see less throughput and the focus would switch to refined oil products, Aamer explained.
"However, more oil would be processed at the Kirishi oil processing plant in the St. Petersburg region, and it would still be transported by railway to Baltic Sea ports, including Tallinn," he said, adding that railway and pipeline do not compete with each other directly.
Aamer said that Estonian Oil Service would invest 20 million euros in reconstructing its storage capacities, upgrading railway facilities and building a new pipeline from the terminal to the port of Muuga.
The company's terminal, located not far from the Tallinn city border, receives heating oil by railway and then pumps it along the 7.5-kilometer pipeline to Muuga.
Arnout Lugtmeijer, chief executive officer of Estonian Oil Service, said most of the money would come from the company's own cash flow.
According to Lugtmeijer, the upgrade of the railway facility is to some extent connected with the problems the company faced in winter 2002-2003, when extremely low temperatures turned unloading heating oil into a nightmare. He aslo said he expected the new government to pay more attention to ice-breaking services in the Muuga port, which had been blocked by ice builup for weeks last winter, hampering wheat and oil transit.
For the transit industry, the mooring and loading this week of the Front Page, a 299,000-ton oil tanker - the largest that ever called to a Baltic Sea port – is one of the year's highlights.
The ship's magnitude is impressive. Its 160,000-ton load could supply nearly one-half of the total annual heating oil consumption in Estonia.
Aamer said the freight price for 150,000-ton and 300,000-ton tankers did not differ drastically, and the final cost of transportation was always lower with larger ships.
Aamer said the Front Page would not be fully loaded in Tallinn for two reasons: First, the full load draught exceeds the limit of the port of Muuga, and second, there is simply not enough heating oil to fill the gargantuan ship.
