Unipetrol petchem profitability may face Russian oil difficulty - ING

07 June 2012 17:27  [Source: ICIS news]

LONDON (ICIS)--The profitability of Czech petrochemical producer Unipetrol could suffer if its struggles to obtain Russian oil via the Druzhba pipeline are not resolved, ING banking group said on Thursday.

Unipetrol has for more than two months been unable to source high crude volumes from the eastern Druzhba pipeline, with Russian oil companies having chosen to divert oil to more profitable export destinations through new infrastructure such as the Baltic Ust-Luga terminal.

During that period, Unipetrol has been able to fully replace lost oil volumes by bringing more crude through the Ingolstadt–Kralupy–Litvinov (IKL) pipeline, which brings oil loaded in Italy to the Czech Republic thanks to a connection with the Transalpine (TAL) pipeline in Germany.

However, Unipetrol’s reliance on the IKL has coincided with the closure of the 100,000 bbl/day German Ingolstadt refinery of insolvent Swiss refiner Petroplus, which also relies on IKL supplies.

“[The pipeline situation has not significantly impacted on Unipetrol’s petrochemical profitability] at this stage. On the other hand, Ingolstadt will be reopened soon, following its recent sale to Gunvor, and that might change the situation,” said Tamas Pletser, a Budapest-based ING oil and gas sector analyst.

A source at Unipetrol said the company was assessing the outlook for crude supplies should reliance on the IKL in the longer term combine with the reopening of Ingolstadt.

Currently, however, the IKL was providing enough oil for both the Litvinov and Kralupy refineries, which supply feedstock to Unipetrol, he added.

The extra cost of IKL-sourced oil compared to Druzhba-sourced oil has in recent months been around $1 (€0.80) to $1.50 per barrel, the source said.

The office of the Czech government envoy for energy security is seeking answers from the Russian government as to what the outlook is for restoring full oil supplies to the Czech Republic via the Druzhba.

Unipetrol is 63%-owned by Poland’s PKN Orlen oil and petrochemical group.

($1 = €0.80)

By: Will Conroy
+44 20 8652 3214

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