Krzysztof Szymichowski comments on oil supply security in Central Europe

On day two of the StocExpo 2016 Conference, Krzysztof Szymichowski, Head of Operations, Marine Oil Terminal at Naftoport, will examine the challenges around oil supply security in Central Europe. Here he outlines an insight into his talk:

The security of oil supply

The security of energy supply affects everyone along the supply chain. The global energy sector faces challenges to provide billions of people with permanent energy supplies, in a sustainable way, at acceptable prices. These issues pose a considerable risk to the international political and economic balance. It is often forgotten that energy security is unlikely to last forever.

Supply dependence

Oil resources around the world are very unevenly distributed, with the EU having very few. The energy resources market is extremely sensitive to the political situation both in oil producing regions and the countries of transit.

Global oil supplies can at any time be physically interrupted due to events in producing regions and transit zones, especially caused by a political turmoil or a state of war. There are questions not only about the level of dependence, but also about the security of ensuring a stable price and harmony of supplies.

A percentage rate of 95% was assumed for Poland’s dependence of oil supply, defined in the Polish Energy Policy until 2030. The vast majority of the oil (up to 94%) is imported from Russia. Such a high level of dependence from a single supplier creates a serious risk. Therefore, for years there have been attempts to diversify the import sources and the transport routes.

Structure of imports

In recent years, crude oil import has covered nearly 97% of its total consumption in Poland, showing a slight upward trend, which suggests no increasing of production in the country.

The structure of the oil import origins also indicates the overwhelming dominance of Russia as a supplier to Poland as around 90% to 96% of imports come from there.

The situation is caused mainly by economic reasons. For years Russian crude oil has been shipped by ‘Przyjazn’ pipeline to Polish refineries at a better price than sea imports. Compared to Brent oil from the North Sea, REBCO was cheaper. The fact that Polish refineries are focused on refining oil, which is provided by the Russians, is of a considerable importance, too.

Recent years have brought changes in the structure of global oil market prices caused by considerable mining technology development together with the exploration and production growth in the US and Canada. Therefore, an increase in supply diversification is to be expected, when it comes to both the quantity of oil from existing suppliers as well as the emergence of new exporters supplying oil to our market.

Polish Energy Policy until 2030 expects an increase in primary energy demand by 22% till 2030, reaching 118.5 million toe and the majority of this growth will take place after 2020.

Proven Polish oil reserves reach 25.9 million t, which is the Polish annual demand forecast for 2015. The dependence of Russian oil companies from the Kremlin contributes to the supply security level of Poland. There are only two possible delivery directions: the ‘Przyjazn’ pipeline from the Russian suppliers and by the marine oil terminal – Naftoport. Clearly, there is the lack of network structure of pipelines, enabling the southbound supplies from the deposits of central Asia. Oil deliveries from the Caspian region can only take place through the Russian pipelines. From the Mediterranean and North Africa the deliveries are only possible by sea.

Future

Economic and energy security all have a lot in common. Desired economic development should be based on energy supplies and alliances. The strategic goal of governments needs to be a close co-operation, energy solidarity with other consumers and openness in relations with energy producers. The construction and modernisation of transshipment, transport and storage infrastructure is indeed of a great importance in the security process of oil supplies.

The model of the modern world is closely linked to the ongoing economic growth that constantly needs a driving force. Technological progress is aimed at continuously increasing natural resources production, including energy, because it contributes to economic growth. One of the key questions that should be asked is the future of energy – what is going to happen when key economic resources become unavailable? How can the growth of technology meet the needs of economic growth?

Krzysztof Szymichowski is one of 30 world leading experts speaking at StocExpo 2016.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.hydrocarbonengineering.com/tanks-terminals/03032016/krzysztof-szymichowski-comments-on-oil-supply-security-in-central-europe-2646/