US embassy cable - 05MINSK1445

UNCLAS MINSK 001445 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG, EPET, ECON, ETRD, BO 
SUBJECT: Belarus: Energy Round-up 
 
 
1. Summary: Post provides a number of energy topics of interest 
that were not otherwise reported.  Natural gas issues will be 
reported separately.  Included are: 
 
--Belarus Buys Russian Electricity, Not Ukrainian 
--Belarus Offers to Process, Rather than Ship, Kazakh Crude 
--GOB Wants More Russian Crude 
--Oil Transit Grows... 
--...And Rail Deliveries Exceed Expectations 
--Belarus Starts Shipping Oil to Ukraine 
--Petroleum Sales Climbing 
--Belarus and Russia Negotiating Long Term Energy Supplies 
 
 
Belarus Buys Russian Electricity, Not Ukrainian 
--------------------------------------------- -- 
 
2. On November 23, Econoff met with Leonid Padalko, an energy 
expert at the National Academy of Sciences (NAS).  Padalko 
explained that Belarus currently needs around 6,000 megawatts (MW) 
of electricity.  Even though Belarusian power plants (all gas 
fired) have a capacity of 7,700 MW, Belarus still imports 1,000 MW 
from Smolensk, Russia at USD two cents per kilowatt hour.  Even 
though Belarus receives natural gas at a very low rate from Russia 
(USD 46.68 per 1,000 cubic meters), the age and inefficiency of 
Belarusian thermal electric plants means it is still more cost 
effective to buy electricity from Russia.  The GOB explored buying 
electricity from Ukraine's Rivne nuclear power plant.  The price 
was good, but the GOB decided against because it would have to 
build a USD 200 million transmission line from Rivne to Belarus. 
There is still a transmission line from Chernobyl to Gomel, 
Belarus, but it is not in use. 
 
 
Belarus Offers to Process, Rather than Ship, Kazakh Crude 
--------------------------------------------- ------------ 
 
3. On November 22, a GOB official told the press the GOB 
"suggested" Kazakh companies use Belarus' two refineries, in Mozyr 
and Novopolotsk, to process the Kazakh crude that currently 
transits Belarus.  Private Kazakh companies annually export four to 
five million tons of crude to Lithuania's Butinge terminal via the 
Druzhba pipeline, which goes through the Novopolotsk refinery.  The 
GOB reportedly told Kazakhstan's energy ministry it would be better 
to process the crude in Belarus and export refined product to 
Lithuania.  Padalko commented that Belarusian refineries have 
excess capacity, and this refining would be profitable for the GOB. 
 
 
GOB Wants More Russian Crude 
---------------------------- 
 
4. A source in the Ministry of Economics told the press on November 
21 that Russia has offered to supply Belarus 19.5 million tons of 
oil (19 million by pipeline, 500,000 by rail) in 2006.  This is the 
same amount as in 2005.  The amount will be finalized at the next 
meeting of the Council of Ministers of the Union State.  The two 
are still negotiating longer term supply, with Belarus wanting 25 
million tons a year, to reflect growing capacity at its refineries, 
and Russia offering 22 million tons. 
 
 
Oil Transit Grows... 
-------------------- 
 
5. From January through October Belarus' pipelines transported 
88.231 million tons of oil, three percent more than the previous 
year.  Transit increased 3.4%, to 72.34 million tons for that 
period.  The Gomel-based Druzhba pipeline delivered 7.939 million 
tons to the Mozyr refinery and transited 60.421 million tons across 
the country.  Of that amount, 40.662 million tons went to Adamovo 
in Poland and 19.758 million tons to Brody in Ukraine.  The 
Novopolotsk-based Druzhba pipeline delivered 7.095 million tons to 
the Novopolotsk refinery and 11.918 million tons to Mazeikiu and 
Butinge in Lithuania.  No oil transited to Ventspils, Latvia during 
this period.  Padalko told Econoff these pipelines are now 
operating around their maximum capacity. 
 
 
...And Rail Deliveries Exceed Expectations 
------------------------------------------ 
 
6. In January through October Russian suppliers shipped 950,194 
tons of oil to Belarusian refineries by rail.  Of this, 674,811 
went to the Novopolotsk refinery and 275,383 to the Mozyr refinery. 
Russia had only agreed to supply 500,000 tons for the year by rail, 
but exceeded the amount after Russneft opened an export terminal 
near the Belarusian border at the Zhecha railroad station.  This 
terminal has an annual capacity of five million tons. 
 
 
Belarus Starts Shipping Oil to Ukraine 
-------------------------------------- 
 
7. On September 28, the chairman of Belneftikhim, Bronislav Sivy, 
announced Belarus was starting to ship oil products to Ukraine via 
trunk pipelines.  For 2006 Belneftikhim planned to ship 300,000 
tons of oil products.  However, the Mozyr Oil Refinery is expected 
to build a 50-kilometer pipeline to Ukraine, to open in 2007.  This 
would allow Belarus to ship one million tons of oil to its southern 
neighbor annually. 
 
 
Petroleum Sales Climbing 
------------------------ 
 
8. On November 25, the Ministry of Statistics announced Belarus' 
two refineries refined 2.717 million tons of gasoline, up 20.1% 
from 2004, from January through October.  Diesel production climbed 
8.9% to 5.277 million tons, fuel oil grew 16% to 5.161 million 
tons, while lubricants fell 23.4% to 105,000 tons.  During this ten- 
month period the output of the two refineries, in monetary terms, 
grew 7.3% to BYR 9.71 trillion [USD 4.5 billion]. 
 
 
Belarus and Russia Negotiating Long Term Energy Supplies 
--------------------------------------------- ----------- 
 
9. In October Russia and Belarus attempted to negotiate Russian 
energy deliveries to Belarus through 2020.  The two sides failed to 
reach agreement on oil (see para 4), but reportedly reached 
agreement on other fuels.  Russia reportedly promised to supply 25 
billion cubic meters of natural gas by 2020 (versus 20.5 bcm in 
2005), 4 billion kWh of electricity (down from 5 billion planned 
for in 2005), and one million tons of coal (up from 230 thousand 
tons in 2005).  Despite these increases, Belarus' next five year 
plan (2006 to 2010) calls for increasing use of domestic energy and 
decreasing dependence on Russian imports.  To that end the GOB is 
converting some factories and apartment boilers to use peat and 
firewood.  The GOB is also searching for more domestic sources of 
oil; currently about 10% of Belarus' oil needs are met by 
domestically produced oil.  However, experts do not believe this 
percentage can be raised.  Belarus does not have significant 
deposits of natural gas. 
 
 
KROL