Russia needs strategic oil storage facilities to help its oil industry and oil trade with Western sanctions, Russian experts and industry officials say.
“Starting today, it is necessary, based on Soviet and world experience, to consider the possibility of creating oil reservoirs with a volume of about 140 million tons and the like for petroleum products,” according to an English translation of Interfax of an article by Gennady Shmal, head of the Union of Oil and Gas Producers, and Rishat Shagislamov, project manager of a department of the Russian Ministry of Energy.
“Organizationally and technically, this should be a distributed system linked to transport infrastructure and using the method of storage in rock salt deposits,” say the Russian industry experts.
Lack of oil storage was one major obstacle to Russia’s oil exports in the first weeks after the Russian invasion of Ukraine, when buyers began to avoid Russian crude and products, uncertain how the West would react with sanctions against Russian oil. As a result, Russia had to cut production, and this is always a risk because some wells and reservoirs may never be restarted.
“The absence of a system of liquid hydrocarbon storage facilities appears to be a serious strategic omission of the domestic oil and gas complex,” the Russian experts admit in the Interfax article.
Officials said in April that Russia was working on building such oil storage facilities as it now looks east to willing buyers.
Russian oil production and exports have remained resilient in recent months, with much smaller declines than initially expected, the International Energy Agency (IEA) said last week in its monthly report. But the agency’s report warned of a 20% drop in Russia’s output if its oil does not find a home with Asian buyers when the EU embargo takes effect in February 2023.
By Charles Kennedy for Oilprice.com
More top reads from Oilprice.com: