The Energy Sector in Belarus

http://i048.radikal.ru/0910/73/1a3a673f65c6.jpgOnly 13 to15% of supplies are provided from Belarus’ own resources. The main type of fuel used in the country is a natural gas, which is purchased in Russia. Its share in the fuel mix is 75-80%.

Belarus is not the only country in Europe which depends on Russian energy supplies. The same applies to the Baltic States, as well as a number of Central European states. However, none of these countries has such a high dependence on one country – Russia – as does Belarus.

With such a huge dependence on one energy supplier, Belarus, which retained practically the entire former Soviet industry, buys such high volumes of energy that could only be afforded by rich countries. For example, in recent years, Belarus bought in Russia about 21 billion cubic meters of gas, and only because of the crisis, imports of this raw material fell by approximately 4 billion cubic meters in 2009.

In recent years, the country exported to Europe about 15 million tons of petroleum products. The revenues generated from its export of oil products formed about one third of its entire income. Belarus provided more than 60% of all exports of petroleum products to EU countries. It is estimated that the growth in exports of petroleum products in recent years provided for 2 to 3 per cent growth of Belarus’ GDP annually.

Gas

http://img.news.open.by/upload/iblock/670/beltransgaz1.jpgNatural gas is the main fuel used in Belarus. The biggest consumer of gas is the electric energy sector, and the enterprises of chemical and petrochemical industry and the production of building materials.

The Belarusian energy system has the capacity to produce the amount of electricity which is required to meet internal demand (up to 40 billion kWh). However, Belarus  imports about 5 billion kWh of electricity, as it is considered to be profitable to import part of the electricity consumed, leaving less effective power in reserve.

Two transit gas pipelines pass through the territory of Belarus. These are the Beltransgaz (Belarusian gas transportation) system, 50% of which belongs to
Gazprom, and the Yamal-Europe pipeline, which is also the property of Gazprom.
Natural gas is the main fuel used in Belarus. The biggest consumer of gas is the electric energy sector, and the enterprises of chemical and petrochemical industry and the production of building materials.

The Belarusian energy system has the capacity to produce the amount of electricity which is required to meet internal demand (up to 40 billion kWh). However, Belarus  imports about 5 billion kWh of electricity, as it is considered to be profitable to import part of the electricity consumed, leaving less effective power in reserve.

Two transit gas pipelines pass through the territory of Belarus. These are the Beltransgaz (Belarusian gas transportation) system, 50% of which belongs to
Gazprom, and the Yamal-Europe pipeline, which is also the property of Gazprom. 
In recent years, the transit of gas through the Belarusian "pipe" has declined. With the capacity of 51 billion cubic meters, the transit through the Belarusian transit network amounts only to 14,5 billion cubic meters. At the same time, the Yamal-Europe has reached the capacity of 33 billion cubic meters.
 
One should not expect cardinal changes relating to the supply of natural gas from Russia to Belarus. The Belarusian side is studying opportunities for diversification of supply sources, but as it turns out, in the short and medium term, these are not visible.

Relatively low energy prices which Belarus had in the past years do not promote structural reforms in the energy and utilities sectors. However, the inevitability of further price increases
for Russian gas renders urgent the need to find ways to reduce costs, increase efficiency and attract investment in the country’s energy sector.

http://www.zastavki.com/pictures/1280x1024/2009/Creative_Wallpaper_radiation_Sign_015990_.jpgNuclear Power Plant

Belarusian authorities believe that the inevitable increase in prices for natural gas is a real threat to energy security of Belarus, because it severely affects economic growth of the country and can have serious social consequences.

The Belarusian authorities seem to think that the only feasible solution in this situation is the
construction of nuclear power plants. Belarus is scheduled to build a nuclear power plant with the capacity of 2 MW by 2020. The plant will consist of two reactors with the capacity of not less than 1 MW each.

The estimated cost of the nuclear plant construction is 9 billion USD. It was decided that the plant will be built by Russia’s Atomstroiexport. However, so far the agreement has not been signed. It was also agreed that Russia would allocate a loan that would fund this project.

Oil
http://ocokin.ru/wp-import/images/d646fefba4e0c286756f9e9920ae5384.jpgThere are two oil refineries in Belarus – Mazyr and Navapolatsk. In recent years, they process about 22 million tonnes of oil, even though the country’s oil production equals to 1.72 million tons.
Until 2010 Belarus, within the framework of energy balance with Russia, was able to export approximately 1 million tons of oil (mainly to Poland and Germany). Belarus’ revenues from the export of its own oil in the past years constituted about 500 million USD a year. However, a new oil agreement with Russia does not include export of Belarusian oil.

Until 2010 the rules of the oil market for Belarus were determined by the agreement with Russia from 12 January 2007. It is worth noting that, in 2007, Belarus had to share the profits generated from the export of Russia's oil. Thus Moscow found it advantageous to collect these benefits immediately, through the introduction of the special duty on  oil delivered to Belarus.

In 2007, the rate of duty on oil for Belarus was calculated at a rate of $ 0,293 from the rate of customs duty on crude oil produced by Russia for export. This rate was calculated using the co-efficient of 0,335 in 2008 and the co-efficient of 0,356 in 2009.

The collection of this fee is essentially a mechanism used by Moscow and Minsk to divide the export duties on oil exported from Belarus (in 2009 the proportion was 85 to 15 - in favour of the RF).

Even though this special fee has been applied since 2007, the price of Russian oil for Belarus was about 150-170 USD / ton lower than, for example, for Ukraine.

However, in 2010 the conditions of oil supplies to Belarus have worsened. Russia has allocated a quota for Belarus in the amount of 6,3 million tons, which will be delivered without fee, and all the remaining materials will be subject to Russia’s duty. It is estimated that because of the new terms the Belarusian budget would lose about 2 billion USD.

Alternatives

http://www.marshruty.ru/PhotoFiles/3/4/2/0/342019d7115a489192f0283d048d2e5f/large/DSC_0413.jpgThe concept of energy security of the country until 2020 incorporates the requirement to find towards 2011 some alternative ways of bringing in approximately 4 million tonnes of Russian oil (20 per cent from the current volume of purchases) through the ports of the Baltic and Black Seas.

Difficulties faced by the Belarusian authorities 3 years ago, during the talks with the Kremlin on energy supplies, forced the Belarusian leadership to actively seek alternative supplies of oil in Venezuela, Iran, and Azerbaijan. However, almost none of these projects has been implemented. Belarus has been able to create a joint venture to produce oil in Venezuela. Today, this enterprise, where the share of the Belarusian side is 40%, produces about
800 thousand tons of oil per year.

Last year, Ukraine called on member countries of the EU's Eastern partnership "to rally around the Odessa-Brody project (Euro-Asian oil transportation corridor) to supply Caspian oil to Europe.

The EU’s Eastern Partnership, which covers Belarus, Azerbaijan, Armenia, Georgia, Moldova and Ukraine, provides connectivity among the main directions of the participating countries to  the European energy system. It is nonetheless unclear how far Belarus’ officials are prepared to support the projects within the EP. Alyaksandr Lukashenka, commenting on this subject in an interview with Azerbaijan’s Trend news agency on 9 November 2009 once again said that it is very important for Belarus to diversify its hydrocarbons. "Russia is a friendly country, but we cannot depend only on one supplier," said Lukashenka. a friendly country, but we cannot depend only on one supplier," said Lukashenka.

According to the Belarusian President, his country is considering the alternative of using Odessa-Brody pipeline. However, he also noted that the final decisions on the supply of Caspian hydrocarbons would be based on economic feasibility. "At the moment, the price of Azerbaijani oil is still too high.” However, “as soon as we agree that it would be economically beneficial, we will immediately start implementing this project," said the Belarusian President.

As concerns Russian-Belarusian relations, the oil issue exacerbated in late 2009, when Moscow decided not to extend energy subsidies to Belarus if the latter did not allow Russian companies to participate in the privatization of its strategic assets.
Famous Ukrainian expert, President of the "Strategy XXI” centre, Mikhail Honchar, believes that the oil industry of Belarus has no future prospects without international cooperation.

As long as Belarus receives oil on preferential terms through the Soviet-era pipelines, it would be able to receive good dividends from exports on petroleum products. The Belarusian authorities are counting on preferential oil supplies and a full load of its refinery and perhaps even expect the privatization of Russia's oil companies.

According to Honchar, it is not an optimal strategy; it is like drug addiction, because it creates the effect of habituation and confidence that this will last forever. "Constant political loyalty does not guarantee economic benefits. These can not be endless, and someone will have to pay some day. Political and military relations are not taken into consideration. They are taken for granted by the ‘donor’", stresses Honchar.
Given that Belarus has a sufficiently modern refineries and produces high quality products, its businesses need access to the markets of neighbouring countries, including EU states. "But this is impossible without international cooperation and without entering into an alliance with leading corporations, even from the countries of Central Europe", clarifies the Ukrainian expert.

Honchar is also convinced that we must think about what will happen after Russia puts into operation the Baltic Pipeline System 2 (BPS-2) – an alternative to the Belarusian pipeline "Druzhba". "Of course, one can trust the promises that the status quo will be maintained. But it is hard to believe that someone who builds such a large-scale system will still be interested in others’ pipelines, even if these are offered at a price of scrap metal. Therefore, there should be more cooperation on prospective oil routes with Ukraine, Poland, the Baltic states, and Azerbaijan", emphasizes Honchar.

During a round table discussion on the "Policy of the European Union and Belarus in the field of Energy: Sharing experience", held in June 2009 in Minsk, Charge d'Affaires of the Delegation of the European Commission to Belarus Jean-Eric Holzapfel stressed the importance of cooperation between Belarus and the EU on energy and said that the EU is ready to provide technical support for reforming the energy sector of Belarus and facilitate the implementation of projects aimed at improving energy security of the country.
At the EU summit in Prague, on 7 May 20009, the European Union and Belarus shared relevant declarations. In this regard Jean-Eric Holzapfel stressed that such cooperation aims to improve the energy security of Belarus and the EU through enhanced contacts between the two countries, the development of energy infrastructure, and the engagement of Belarus in projects aiming at finding new opportunities of supply and transit of energy resources.

Bridge for dialogue


With the expansion of contacts between Minsk and Brussels, the Office for a Democratic Belarus (ODB) is implementing a number of projects that aim at bringing Belarus closer to the European system by promoting the improvement of knowledge and professional skills of Belarusian experts in their respective areas.

The ODB organizes trips to Brussels that facilitate cooperation with various EU institutions and programmes. The Office has organized visits of Belarusian professionals in the fields of transport and transit, energy, environment, education, etc. As a follow up to these visits, round table discussions are held in Minsk with the participation of European experts.

Thanks to this, Belarusian experts, representatives of private businesses and state institutions have the opportunity to establish closer contacts with their European colleagues and a platform for ex-change of ideas and organization of more effective cooperation with the EU.
 
In October 2009, a new "Energy Club" project was launched in Minsk. This is a joint initiative of the Office for Democratic Belarus (Brussels, Belgium), Belarusian Institute for Strategic Studies (Vilnius, Lithuania).
 
The fist session of the club was held in cooperation with the Nashe
Mnenie portal and the Konrad Ade-nauer Foundation .
The mission of the "Energy Club" is to establish a platform for expert dialogue to discuss and find possible solutions to the problems of energy and energy security in Belarus.
 
The first meeting of the "Energy Club" brought together independent experts, representatives of state institutions, scientists and foreign diplomats. Participants discussed most pressing challenges facing the energy sector of Belarus, prospects and risks associated with the country’s participation in regional projects on energy, as well as the lessons of the recent gas “wars” in the region and their implications for energy security of Belarus. The next meeting of the "Energy Club" will be held in Minsk on March 11, 2010. 

  By Tatsyana Manyonak for the ODB