Oil to Belarus: does it make (any) sense?

UPDATED

The Gomelskaya Pravda, a regional Belarusian online news site, published an article about the recent Venezuelan oil shipments to Belarus. Lukashenko had recently been to Venezuela in order to sign some agreements with Chávez including oil shipments to Belarus. Venezuelan oil would help to pay for, among other things, Belarus companies building in Venezuela what Venezuelan companies are apparently now unable to build: houses. Belorussian friends and I initially thought the shipment would mean shipping oil from Venezuela to Western Europe or somewhere else closer to Venezuela so that Belarus could use some Russian oil originally destined to the Western European market for internal upgrading and reselling as refined products. Blogger and oil expert Gustavo Coronel also confirmed to me the kind of oil contracts people signed between parties located very far away from each other: a country like Venezuela would provide oil to Spain (for instance) and oil passing through Belarus to Spain could instead be used by Belarus for something else. In the end, the markets will optimize deliveries. Sending oil all the way accross sea and land does not make too much sense. Well, it seems that is not the case here.

The article has the title "Black Gold in the Mozyr Oil Refinery". It basically says the first oil shipment from Venezuela arrived in Belarus now. 80000 tons - about 480000 barrels - were shipped from Venezuela all the way to the Black Sea and there to the Ukranian port of Odessa. The oil was put into train containers in Odessa and sent to the South Belarussian city of Mazyr (or Mozyr). Belarus is a landlocked nation.

The issue was important enough for the Belarussian Prime Minister, Sergei Sidorsky and other Belorussian honchos to go to Mazyr and organize an event. Sidorsky gave a speech and mentioned the need to minimize losses in oil refining and that they wanted to increase the light oil products to a percentage of 90% or higher. The oil being shipped is apparently Santa Barbara oil, which is one of the best Venezuela has.

The Belarussian admitted there are concerns about the profitability due to the logistics involved. The general director of the Mozyr Oil Refinery said the Venezuelan oil should be no problem as it is similar to the one they have processed from Russia. All in all, the article timidly hints at logistics and transport costs as being "the" issue. Economists would be calculating costs now. I wonder why they could not do it before the transport. In any case: Belarusians would process the oil and try to sell it as processed products in the European market. The Venezuelan and Belarusian governments plan to set up a joint company to do that where 75% of the shares are Venezuelan and 25% Belarussian.

The Belarussian plant can process 7 to 8 tons a day. 20 trains are required to transport the whole 20 tons from Odessa to Mazyr. 2 trains a day are sent. Belorussians said they think Ukraine is interested in participating. The Druzhba pipeline would be a cheaper way to transport the oil to the refinery in Belarus.

Gustavo Coronel says some sources think the 800,000 tons of "sample oil" could be the start to later ask for 4 to 10 million tons. 4 million tons are equivalent to 24 million barrels of oil or about 70000 oil barrels a day. Gustavo does not believe Venezuela can produce 70000 barrels of Santa Barbara a day.

To me all this sounds like a plan the líderes of both nations concocted in a jiffy and pushed through to initiate without a throrough analysis, even if this is portrayed in this article as a pilot project and the transport from Venezuela to Belarus is just a possibility.

I wonder what are the final costs Venezuela will have to pay for all this.

Ps. My thanks to Gustavo












Mazyr (Mozyr) is in the South-Southeast of Belarus. Our oil goes all the way to that spot now.