Not turning down the profit
JSC Ventbunkers is a rather young enterprise – this year the company celebrated its 10th years anniversary. It was established on the base of the Ventspils Bunker Workshop and further developed as a stevedoring enterprise by means of extending and modernizing the terminal facilities for oil product trans-shipment. Miks Ekbaums, JSC Ventbunkers president, comments on the company latest development projects and its market policy.
Today the core activity of the company lies within trans-shipment of oil products at the terminal with their further loading on vessels, and the company development is based on the specific character of this market sector. To compare with the Russian export indexes, the major share there falls to the export of crude oil, which Russia attempts to ship via its own ports. Ventbunkers does trans-shipment of oil products – diesel and fuel oil – and the entire company infrastructure is oriented to provide for this service. The choice of a shipping route in oil products exports is determined by closeness of oil-refineries to ports. With the positioning of some of the oil-refineries the port of Ventspils provides for the best trans-shipment location for further deliveries to the global consumption market. The fuel oil export boosts in winter period, and the demand for services rendered by ice-free port of Ventspils, and Ventbunkers terminal in particular, exceeds its existing capacities. Last winter the terminal was able to provide for trans-shipment of 70% of the totally offered fuel oil at the best.
Things change and so do our fuel oil hand- ling capacities in the port. We are ready to announce that starting with March 2004 a new railway platform will be put into operation able to handle 58 railway tank-wagons with fuel oil at a time which together with the exhisting capacities will provide for handling of 92 units instead of 34 tank wagons as before the construction was started.. On the new railway platform fuel oil cargo will be handled by means of advanced technology allowing to reduce the handling times and to do it at least four times faster then currently. In respect to the new technology the fuel oil tank-wagon is warmed up from the top and the bottom simultaneously by means of thermal oil injections. This way the condensed fuel oil turns into liquid and is ready for trans-shipment. Along with the new railway platforms new oil-tanks with 60 000 cubic meters capacity will be put into operation, which together with the existing facilities shall provide for the capacity of 330 000 cubic meters. After the reconstruction our operational capacity will expand, and terminal will be even more attractive to customers. Next winter we will be able to handle all the fuel oil cargo arriving to the terminal.
In my opinion politics distorts the market. Varied tariff policy for goods delivered by railway, bans and restrictions is not the right way to solve problems. Since everything costs money, and there should be somebody who pays for interferences into natural trading environment by issuing new political decisions favoring particular parties. Advantages and benefits of the port of Ventspils are obvious, and this attracts all kinds of interested parties – both good- and ill-willed. Politics is a tool to back somebody's interests. Going down to the profile of Ventbunkers, it gives certain guarantees that business remains somewhat beyond political processes. Regardless various artificially created obstacles we keep receiving cargos at the terminal. On the whole volumes of oil products trans-shipment are growing, as shown by the data of the previous years (see graph). However, investments are also very important in order to be able to increase capacities and service speed and quality (see graph). Cargo turnover next years will depend on how long-sighted the company's policy is today. According to the development plan, by year 2009 we will see a considerable increase in volumes and the product range.
Just like any other business, oil products trans-shipment faces severe competition which in the case of Ventbunkers is among Latvian, Estonian, Lithuanian and Russian terminals. Every terminal aims at developing its capacities. It is hard to say how justified this policy is, though one thing is clear: in spite of new governments and politics, Russian economy depends on the oil export greately. The oil production grows year by year and according to experts this tendency will remain stable for the coming 5–10 years. Therefore every port tries to offer the best oil export conditions possible. The port of Ventspils is highly competitive in respect to handling of the Russian oil and oil products. Trans-shipment costs and reliable supplies are counted among the port’s advantages along with a longstanding experience and developed infrastructure.Ventspils is an ice-free port, which is of great importance to our customers. Otherwise it would create a chain reaction in the entire process – oil loading in the oil-refineries would get terminated, there would be congestions on the railways, oil delivery terms would be deviated, which would consequently cause extra expenses and more. The colder is winter, the higher demand for Ventspils services is. Speaking about the price constituent, the whole transportation route is to be taken into account, as the cargo reaches the consignee, and not separate segments or services. Oil products trans-shipment market is distinctly outlined, where every terminal has its own regular clients, who generally benefit from one specific route – an export port one works with.
Oil, if I may say so, is a strategic product. Therefore we cannot fully escape political interferences here. I assume that the oil production and export policy in Russia corresponds to the interests of the Russia itself, although the EU might not be very happy about it. Provided that export share for US grows, it will cause variation in price, which again does not meet the EU interests. Our position is likely to become more beneficial with the EU enlargement. We do not exclude a possibility that the EU will attempt to limit the Russian oil export. If this takes place restrictions will reflect on Russian ports, not those of the EU.
Kazakhstan is one the countries with increasing oil production volumes. Great expectation there are related to the exploring of the Caspian shelf. We have worked out some projects for handling of the Kazakhstan oil in the port of Ventspils and even did some trans-shipment. However, today the situation came to the fact that major customer for the Kazakhstan oil is China. In this case Russian tariff policy is an important issue for Ventspils. If it is acceptable, both parties – Ventspils and Russia – shall benefit from the Kazakhstan oil transit. If not, Kazakhstan and China will be carrying out their projects without Russia and Ventspils involved. Anyway, we work on this issue and hope to find optimal solutions for all the parties involved.
Ventbunkers is one of shareholders in Noord Natie Ventspils Terminals, and therefore interested in its development. The terminal takes advantage of using all the above-mentioned privileges of the port. The terminal has its own advantages, which makes it different from its competitors – like application of new technologies and techniques. For instance, various port cranes can operate cargo of 30, 60 and 100 tones. Operation speed makes 25 moves per hour. Last year the cargo turnover was constantly increasing at the terminal. We are considering to introduce several regular container lines along with the two existing ferry services Germany and Sweden, as well as some other projects in the port. When they are carried out, I believe, the terminal will become even more attractive for our customers in terms of handling of diferent types of cargo.
At the heart of the Union
Primarily, Ventspils is a very important transit port for diferent types of goods – fuel oil, general, containerized cargo and more. At the same time Russian railway tariff policy in respect to the Baltic States ports restrains the development of our activities in full. Hopefully the railway market in Russia gets liberalized and rules will be equal for all the market players. The situation could possibly change with the EU expansion. Anyhow I believe that state cannot regulate the market in a long run, otherwise these activities may be treated in various ways by the economically developed countries, which actually determine relationships within global economy. I assume that Russia is aiming at becoming one of them, therefore discriminating policy regarding particular countries cannot last for a long time, even if the Russian government tries to influence the transport service market. There are many cases known when state enterprises develop rather dynamically and are market demands responsive. A good example here is Norwegian oil giant Statoil. Lobbying forces of the Russian ports from one side and the EU policy – from the other will determine the future policy of the Russian railways. This is a reality, which is to be taken into account, otherwise it violates the main idea of the EU, since those are economical criteria that are lying at the heart of the Union.