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German Refinery Faces Crude Shortage As EU Sanctions Kick In

The PCK Schwedt refinery in Germany is facing a shortage of crude when the latest EU sanctions against Russia come into effect, the chief executive of Shell, which is a minority shareholder in PCK Schwedt, said.

According to a Reuters report, the refinery was majority-owned by Russia’s Rosneft before the German government moved to oust the Russian company last month. Although the process has not yet been completed, Germany has made it clear it does not want a Russian company to operate one of its biggest refineries.

The problem is that the refinery, which has a capacity of 233,000 bpd, operates on Russian oil, delivered via the Druzhba pipeline. Once the oil embargo takes effect, there will be effectively no raw material for the processing facility.

According to Germany’s economy minister Robert Habeck, the country is in talks with Poland, although, "The Poles say, quite rightly, 'We don't want to bring Polish oil to Germany to keep Schwedt alive'.”

"But we are speaking about a case where Germany supports Poland and Poland supports Germany in the event that Rosneft is no longer the operator of the refinery," he also said, as quoted by Reuters, in late April.

Commenting on the potential fallout of the embargo this week, Shell’s Ben van Beurden said that the embargo "will probably mean that that refinery will be turned down quite significantly because the incoming logistics are constrained and the refinery is not configured for anything else but Urals”.

Schwedt is not the only refinery in Europe configured for the Russian blend. Lukoil Neftohim Burgas, Bulgaria’s single refinery and the largest processing facility on the Balkans, also uses Urals crude as feedstock, which makes its future uncertain in case of a blanket embargo on Russian oil in the EU. Bulgaria has asked for an exemption, however, alongside Hungary, Slovakia, and the Czech Republic.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on May 06 2022 said:
    Even before taking the decision to ban Russian exports of oil and petroleum products, Germany, the largest economy in the EU and the EU as a whole are starting to count their losses.

    The 233,000-bpd PCK Schwedt refinery in Germany which was until recently majority-owned by Russian oil giant Rosneft and which is only configured to operate on Russian Urals crude, could become a stranded entity.

    However, Schwedt is not the only refinery in Europe configured for the Russian blend. Lukoil Neftohim Burgas, Bulgaria’s single refinery and the largest processing facility on the Balkans, also uses Urals crude as feedstock, which makes its future uncertain in case of a blanket embargo on Russian oil in the EU.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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