Prime Minister
Vladimir Putin of Russia and Jadranka Kosor of Croatia discussed the oil
transportation scheme known as Druzhba-Adria integration during Kosor’s recent
visit to Moscow.
The trip marked Croatia’s
accession to Gazprom’s South Stream project and opened the way for Russian
energy companies’ expansion to the Adriatic coast (EDM, March
5).
Druzhba-Adria integration
is a decade-old proposal to pump Russian oil volumes from the Druzhba pipeline
southward, via Hungarian and Croatian pipelines, to the port of Omisalj on
Croatia’s Adriatic coast, for onward shipment by tankers. The proposal entails
using Croatia’s transit pipeline, known as Adria Oil Pipeline (Jadranski
Naftovod – Janaf), in a reverse mode. Rather than transporting oil from the
world market to land-locked Central Europe, as originally intended, the Adria
Pipeline would be reverse-used to carry Russian oil for
export.
Such use of the Adria
Pipeline would jeopardize its role as a non-Russian supply option for Central
Europe, reinforcing Moscow’s grip on that region’s oil supplies. The line’s
proposed reversal resembles the model of the Odessa-Brody oil pipeline’s
reverse-use in Ukraine. That line had been built to carry Caspian oil to Ukraine
and Poland, thus reducing those countries’ dependence on Russian oil. Since
2004, however, Odessa-Brody is being used southward, for Russian oil exports,
instead of northward for Caspian oil imports.
An agreement of intent was
signed in 2002 on Adria-Druzhba integration and Adria Pipeline reversal. The
project did not materialize, however, as the Croatian government understood its
strategic implications. The new government, in office since mid-2009, seems
tempted by this project; as does the Janaf company, which operates the Adria
Pipeline, Omisalj port terminal, and the related
infrastructure.
Janaf Chairman, Ante
Markov, accompanied Kosor to Moscow for the talks with Putin. The visit
re-launched discussions between Janaf and Transneft, Russia’s oil pipeline
monopoly and Druzhba operator, regarding the Druzhba-Adria proposal. Russian oil
producing companies also participated in the talks. GazpromNeft and Lukoil have
recently been in negotiations with Janaf about using the port of Omisalj for
Russian oil exports, expanding storage capacities there for Russian companies,
and creating an international oil trading exchange. Kosor expressed her hope
that the Janaf-Transneft negotiations would be continued to a successful
completion (Interfax, HINA, March 2, 3; Novi List, March 4; Janaf press release
cited by Poslovni Dnevnik, March 4).
The Adria pipeline and
associated infrastructure (the system) was built from 1984 to 1990 as a
non-Russian supply option, to link the Adriatic coast with Central Europe. The
pipeline inland was largely mothballed during the conflicts in ex-Yugoslavia;
and has been used sparingly since. The Adria Pipeline has three branches that
run from Croatia into Slovenia, Hungary, Bosnia and Serbia, respectively. It has
a design capacity of 34 million tons per year cumulatively, and an operating
capacity presently of 20 million tons per year, again cumulatively for the three
branches. The Hungarian link’s capacity (running toward MOL’s Szazhalombatta
refinery) is said to be 10 million tons per year. Janaf’s stakeholders are the
Croatian state (the government and several state agencies) with an aggregate 78
percent stake, the oil and gas company INA (where the Croatian government and
the Hungarian private company MOL are the main stakeholders) with 16 percent,
and other shareholders with 6 percent (www.janaf.hr, accessed March 7; HINA,
March 2).
The port of Omisalj is
ideally located in a sheltered, deep-water bay of Krk Island in the Adriatic.
The port handles supertankers all year-round and Janaf seeks to enlarge the
existing storage tank farm with Russian support. Omisalj is connected by
underwater pipelines to INA’s refineries at Sisak and Urinj-Rjeka onshore. Sisak
is the starting point of the oil transit pipeline inland.
The Russians apparently
propose using the transit pipeline in reverse in three incremental stages: first
at five million tons annually, then 10, and afterward 15 million tons annually,
with an option to later expand the line’s capacity. The Croats apparently
suggest reconstructing and reverse-using the Omisalj-Sisak underwater pipeline
as an initial step, one palatable to the influential Eko Kvarner pro-environment
and pro-tourism association. The area in question is a major source of revenue
for Croatia from tourism. (Interfax, March 2; Poslovni Dnevnik, March
8).
Those Russian-proposed oil
volumes seem unrealistic beyond the initial, five million tons per year. Russia
is in the process of shifting substantial volumes from the Druzhba system into
the Baltic Pipeline System (BPS One apparently completed, BPS Two under
construction). The Russians had proposed five million tons per year in the
agreement of intent that was signed in 2002.
The Odessa-Brody experience
is a useful one for Croatia and the Adria system. Russian oil companies used
Odessa-Brody for a long time below its capacity. Moscow’s foremost goal is
simply to deny the pipeline’s use to others, so as to block imports of
non-Russian oil into Central Europe. It remains to be seen whether the Croatian
government and Janaf can reconcile their business agenda with Moscow’s strategic
agenda, without cutting off Central Europe from the world oil market via the
Adriatic coast.
(from Eurasia Daily Monitor)