Apr 22 2022
Poland is looking further afield and building ties with Saudi Arabia as it diversifies its sourcing of ultra low sulfur diesel following Russia's invasion of Ukraine and an upsurge in Ukrainian reliance on fuel from Poland, according to market and shipping sources.
Polish ULSD imports spiked to a new record of around 701,000 mt in March, according to Kpler shipping data, far outpacing the three-month moving average of around 384,000 mt/month of diesel imports and the March 2021 level of 363,000 mt.
In a never-before seen move, long-range tanker Minerva Pisces recently carried around 95,000 mt of Saudi ULSD from Yanbu to Gdansk, while around 35,000 mt arrived from BP's Rotterdam refinery in the Netherlands, split over two parcels.
It comes as EU member Poland, a strong supporter of Ukraine, steps up efforts to limit reliance on Russia -- before the war Poland had taken crude from as far afield as Iraqi Kurdistan -- and as Poland's PKN Orlen is in the process of selling Saudi Aramco a stake in the country's Number 2 refinery, Gdansk.
In addition, Poland is becoming the main source of fuel for war-torn Ukraine following the destruction of Ukrainian fuel infrastructure, including parts of its largest refinery, Kremenchuk, and as Ukraine has cut imports from northern neighbor Belarus, an ally of Moscow.
However, the vast majority of Poland's March imports were still of Russian origin: around 525,000 mt -- almost 75% -- came from Russia's Baltic port of Primorsk, while 46,000 mt originated nearby in Lithuania, where PKN Orlen owns the Orlen Lietuva refinery at Mazeikiai.
Normally Poland relies on Russia for up to 100% of its diesel imports, while East of Suez arrivals in Europe rarely get further north than the Amsterdam-Rotterdam-Antwerp hub.
The dominance of Russian diesel generally precludes alternatives being shipped from ARA to the Baltic, although steep discounts for Middle East diesel may have been a factor in March, with FOB Arab Gulf 10 ppm ULSD averaging a near $10/b discount to CIF NWE cargoes, according to S&P Global Commodity Insights data.
In April, Poland continues to expect arrivals from further afield. By the end of April, around 172,000 mt of Russian diesel is set to have arrived -- around 50% of total imports, according to Kpler data. However, a second long-range tanker, Polaris Bay, already delivered around 88,000 mt of ULSD from Yanbu to Gdansk on April 5.
A cargo of around 30,000 mt of ULSD from West Coast India also arrived on the tanker Seasprat, having loaded from a larger vessel via ship-to-ship transfer.
A second cargo of around 35,000 mt from BP's Rotterdam refinery also made its way to Poland in early April, Kpler data showed.
Poland is almost the sole conduit for meeting Ukraine's fuel needs, including military and agricultural demand, due to lack of supply from Belarus and Russia, and the closure of Black Sea imports from countries such as Azerbaijan as a result of war risk. The geography of the Carpathian Mountains limits shipments from neighbors such as Hungary or Romania.
Ukraine's largest refinery, Kremenchuk, was badly damaged in a missile attack on April 2 and put out of action, while the Shebelinka Gas Processing Plant in eastern Ukraine was taken offline on Feb. 26 due to the threat of shelling. In addition, the Odesa and Lysychansk refineries were hit by air strikes in April, though both had been out of action for more than 10 years.
Imports via tanker truck are an increasingly important means of supply as Russia's navy has targeted fuel depots across the country, according to Ukrainian analysts and industry sources.
In 2021, Ukraine imported 8.79 million mt of petroleum products, up 9.6% from 2020, according to the state customs service.