(Bloomberg) -- Poland expects that talks on oil supplies for a large refinery in eastern Germany will be completed this year as both countries prepare for an embargo on Russian crude to kick in.
The Schwedt refinery near the Polish border supplies Berlin and much of eastern Germany with fuel. It currently gets its oil via the Druzhba pipeline directly from Russia, a route that won’t be available for Germany once the embargo takes effect in December. The government in Berlin, which took control of the Schwedt plant by freezing the assets of its Russian owner Rosneft PJSC, needs Polish oil shipping infrastructure, including the port of Gdansk, to secure sufficient supplies for the refinery.
In theory, there should be enough capacity in the pipeline from Gdansk already, but the refinery would need to coordinate deliveries with a local rival refinery, Leuna, controlled by TotalEnergies SE, and PKN Orlen SA’s unit in Poland, according to Polish Deputy Climate Minister Adam Guibourgé-Czetwertynski. Orlen owns two refineries in Poland and also uses the port of Gdansk for imports.
“The goal of the talks with Germany on supplies to the Schwedt refinery is to prepare for the moment when the embargo on the Russian oil comes into force and to coordinate our actions to ensure the region’s energy security,” Guibourgé-Czetwertynski said in an interview in Warsaw on Thursday. “We would like to work out a solution by the end of the year.”
The deputy minister said that Germany’s move to take Rosneft assets under trusteeship was “a good sign that there is the understanding of threat posed by the presence of Russians in this system.”
“What must happen, and what we have been consistently emphasizing from the outset, is that we will not take actions that will benefit Russian entities,” he said.
The deal between Poland and Germany could also include Orlen buying a stake in the refinery, Climate Minister Anna Moskwa said earlier this month. Her deputy declined to confirm this option adding that he didn’t want to prejudge what the companies might want, or when.
Poland’s port of Gdansk can in theory process supplies of 36 million tons of oil a year, with two Polish refineries using as much as 27 million tons. The remaining capacity could be used by the two German plants and while Leuna is already buying crude via Gdansk, Schwedt, whose annual throughput is at 12 million tons, is yet to do so.
As such, importing oil from Gdansk might only be a partial solution for Schwedt. Additionally, the refinery could also use a pipeline link from Rostock, on the German coast, to get its crude.
The deputy minister said technical groups from both countries are now analyzing various options to secure oil supply. Longer-term scenarios include increasing capacity of the pipelines or expanding the port, while in the short-term, drag-reducing agents could be used to maximize flows. However, simple coordination could be enough.
“The biggest practical challenge is to improve logistics,” Guibourgé-Czetwertynski said. “I hope that we will be able to find free slots in the schedule between orders for deliveries which are already in progress.”
The Schwedt and Leuna refineries can each process more than 200,000 barrels of crude a day, according to data compiled by Bloomberg.
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