Germany Scrambles To Take Control Of Russia-Owned Refinery

Germany is considering various ways of keeping the fourth-largest refinery in the country operating as it looks to eliminate oil import dependence on Russia by the end of the year because the refinery that provides 90 percent of the fuel to the capital city Berlin is majority owned by Russia’s Rosneft.

Germany has several options for the Schwedt refinery—54-percent owned by Rosneft—including expropriation. But the German authorities fear retaliation from Russia in case of expropriation, including retaliation consisting of Moscow cutting natural gas supply to Germany, sources close to the deliberations told Reuters on Tuesday.

Germany has been preparing to take control of the Schwedt refinery under a plan that could see inputs shipped through the German Baltic Sea port of Rostock and the Polish port of Gdansk through an alternative pipeline link.

The refinery in Schwedt is being supplied with Russian crude oil via the Druzhba oil pipeline, which is exempted, for now, from the EU embargo on Russian oil imports, which will take effect at the end of this year. Germany, however, has pledged that it would eliminate all dependence on Russian oil by the end of the year. This means it has to procure alternative crude supply for the Schwedt refinery and to figure out how to operate the facility without its current majority owner and operator Rosneft.

The Russian oil giant, however, has so far refused to negotiate a sale of its stake in the refinery with Germany, or to discuss other solutions, according to Reuters’ sources.

Germany has considered making Shell, which has a minority 37.5-percent stake in Schwedt, a temporary day-to-day operator of the site, but Shell is neither interested in taking a permanent operatorship role nor in increasing its stake in the refinery, government and company sources told Reuters.

Another idea is making Poland’s refiner PKN Orlen a temporary operator of the Schwedt refinery as it could supply non-Russian crude from Gdansk. But Poland wants Rosneft ousted from the refinery before considering an agreement to run it, Reuters’ sources say.

By Charles Kennedy for Oilprice.com

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