Technical aspects of variable use of oil pipelines coming into the EU from third countries External study

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1 Technical aspects of variable use of oil pipelines coming into the EU from third countries External study Adam Szolyak Policy Officer DG ENER Coal and Oil EU-Russia Energy Dialogue Thematic Group on Energy Market Developments Subgroup on infrastructures Moscow, 17 September 2010

2 EU Policy context (1).2 nd Strategic Energy Review Energy Security and Solidarity Action Plan» Endorsed by European Council, December 2008.Aim: secure sustainable energy supplies in the EU, challenges between 2020 and 2050» 'Infrastructure needs and the diversification of energy supplies'» 'External energy relations' 2

3 EU Policy context (2) - Oil.Oil specificities:» Currently 40-50% of primary energy needs for EU 27» PRIMES model indicates: oil remains the most important in 2020» Indigenous production declining» Increased import dependency.need for emergency preparedness» Future policy decisions require facts based, hard data Study examining how to develop internal & external strengths: reverse flows 3

4 Feasibility study purpose & focus.the purpose of the feasibility study is to identify and analyse the technical aspects of the variable use of existing crude oil pipeline infrastructure coming into the EU from third countries. In addition to the technical aspects the study is to cover the necessary modifications of the legal framework in place and give a first estimate of the expected financial implications of the variable use. 4

5 The approach to conduct the study Approach of external contractor to conduct study.the focus of the study: Options available with existing EU infrastructure to prevent supply disruptions.the questions to answer were not whether and why supply interruptions could happen, but: Is the EU ready for them? What else can we do to be ready?.the objective was to assess preparedness for longer lasting or permanent interruptions Strategic stocks is the tool for temporary disruptions 5

6 How Europe gets its supplies today via oil pipelines in the study region.druzhba entry points at Adamowo, Budkovce, Fenyeslitke.Adamowo-Plock tend to be used at capacity, with incremental oil that transits for export via Gdansk.Adamowo-Plock possibly being expanded by 20MTA.Pomeranian pipeline used in the direction of Gdansk.Rostock-Schwedt and Adria pipelines little utilized.ikl only 30% utilized 6

7 Pomeranian pipeline key asset to prevent disruptions of supply along Northern Druzhba.Flow on the Pomeranian pipeline can be reversed (capacity 34MTA).The pipeline from Rostock could be activated (6.9 MTA).Total crude oil supply to inland refineries would be 40.9 MTA.Inland refining nameplate capacity is 39.9 MTA 7

8 Adria and TAL-IKL are the key systems to prevent supply disruptions on the southern Druzhba.Adria (14 MTA) can supply the Szazhalombatta refinery and up to 3.5 MTA to Slovakia.IKL (10 MTA) sufficient to supply the Czech refineries.tal (42 MTA) can fill up IKL in case supplies to Karlsruhe via SPSE are maximized Possible solutions Odessa-Brody-Uzhgorod, if the cause of supply interruption is upstream of Brody Expansion of the Hungary- Slovakia link New line from Schwechat to Bratislava Reverse flow from Kralupy to Bratislava 8

9 Odessa Brody Plock is technically quite easy.pipeline currently used to carry oil from Brody to Odessa. Capacity could be expanded to 40MTA, this exceeds demand on south Druzhba.To utilize this capacity the following would be needed: a connection to Plock or reversing one pipe to Mozyr.The system could supply segregated sweet crude into southern Druzhba.Limited investment needed in Ukraine and in Slovakia to allow batching 9

10 Bratislava Schwechat has a commercial justification and makes a contribution to security of supply as well.the distance between Bratislava and Schwechat is only 60km.Oil prices along Druzhba normally lower than via TAL/AWP.Good incentive to develop this project for commercial reasons.normal flow to Schwechat.In absence of oil supplies to Bratislava flow could be reversed.flat landscape: lower construction costs 10

11 Conclusions (I).Bratislava-Schwechat» The project is being promoted for commercial reasons» Once pipeline is built reverse flow appears easy to implement» Incremental cost for reverse flow very low» Contribution to security of supply (~2-3 MTA to Bratislava refinery) 11

12 Conclusions (II).Odessa-Brody» Largest potential contribution to security of supply» Contributes to reduce Black Sea and Turkish straights congestion» Potential to develop link to Poland, Germany and the Baltic Sea 12

13 Conclusions (III).Adria» Provides already full back-up to Hungary» Can serve also Bratislava, Kralupy and Litvinov refineries 13

14 THANK YOU FOR YOUR ATTENTION! 14