Slovakia, Hungary draw more crude oil from Russia's Tatneft after Lukoil sanctions

Slovakia and Hungary have hiked pipeline imports of Russian crude from oil and gas company Tatneft in response to the Ukrainian embargo on flows from rival supplier Lukoil, the Russian Foreign Ministry reported Sept. 6.

The landlocked Central European countries had so far avoided EU sanctions on Russian crude imports via its pipeline system Druzhba, meaning new sanctions imposed by Ukraine in June sparked renewed energy security concerns.

Tougher measures from Ukraine targeted pipeline exports from Russia's Lukoil, which is responsible for the flow of some 40,000 b/d to Slovakia and Hungary and a substantial volume of the total 250,000 b/d flowing through the southern branch of the Druzbha connection.

The policy had triggered a tense standoff with Hungary and Slovakia, which warned of disruptions to its refinery operations; however, some 330,000 metric tons (around 80,000 b/d) of crude imported from Russia's Tatneft via Druzhba in July have been used to replace lost Lukoil supplies, the Russian Foreign Ministry said.

In a statement Sept. 6, Maria Zakharova, a spokesperson for the Foreign Ministry, said that the increased supplies from Tatneft had ensured the "normal functioning of the fuel and energy complex" in both countries, stating that the company's stronger export activity had successfully replaced lost Lukoil supplies.

Russneft, another Russian oil supplier, declined to comment on the volume of its pipeline deliveries, but Russia's Kommersant reported late August that the company had supplemented Tatneft flows in July, contributing to the remaining 23% and 7% of Russian crude delivered to Hungary and Slovakia, respectively. Tatneft and Russneft are two of the main non-Lukoil suppliers, along with several other smaller companies.

In an earnings report Aug. 9, MOL assured that it had not experienced interruptions in Russian crude supply via the Druzhba link, which has typically accounted for around 70% of feedstock for its Danube refinery. In July, the Hungarian Prime Minister's Office also suggested that the country's domestic crude reserves would last around two months if all Russian pipeline supplies were halted.

Alternative supply link

The figures suggest a continued reliance on Russian crude inflows via the pipeline connection, rather than a wholesale pivot to the Adria pipeline, which links the two countries to Croatia.

Hungary's MOL, which still processes Russian oil at its 165,000 b/d Danube refinery in Hungary and at its 122,000 b/d Bratislava refinery, had previously said it could supply around 80% of its crude oil requirements by increasing its utilization of the Adria pipeline, but warned that a shift translates to higher technical risks and logistics costs, and Russian imports would still be necessary to supplement supplies.

MOL had previously contracted some 2.2 million t/year (44,000 b/d) to be delivered via the pipeline in 2024, representing a fraction of the pipeline's 14.3 million t/year (286,000 b/d) capacity to the Hungarian border, according to the Croatian pipeline operator Janaf.

Neither MOL, Janaf nor Tatneft were immediately available for comment.

According to S&P Global Commodities at Sea data, crude imports to the Croatian port of Omisalj were up 24% month on month in July and an additional 4% in August, averaging 148,700 b/d and touching a 15-month high.