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At Varandey, new low followed by upswing

The Varandey oil terminal is a major source of oil shipments through the Barents Sea

Lukoil’s oil terminal on the Pechora Sea coast in 2012 had a 20 percent drop in both exports and revenues. But shipments are expected to bounce back in 2013.

Location

The Varandey terminal was considered a major breakthrough in Lukoil’s Arctic engagement when it was opened in 2008. Since then, however, both volumes and revenues have gradually plummeted. While the terminal, which has a capacity of 12 million tons of oil, in 2009 exported 7,5 million tons, the volumes in 2012 dropped to 3,12 million tons. Similiarly, net profits in 2012 shrunk by 23,2 percent to 1,8 billion RUB, Portnews.ru reports.

Despite the drop, the Varandey terminal remains a major source of oil shipments in the Barents Sea. Most of the oil is sent to Murmansk where it is temporary stored and subsequently reloaded into tankers bound for western European ports.

Lukoil developed the Varandey terminal in connection with the Yuzhno-Khilchuyu field in the Nenets tundra. However, this field turned out to hold far less resources that originally estimated, resulting in the drop in exports.

That drop however is expected to soon be replaced by oil from other fields in the region. As BarentsObserver reported, Lukoil has connected the Kharyaga, a field operated by Total, to its regional pipeline grid and the Varandey terminal. Other fields in the region, among them the Titov and Trebs fields, are expected to follow suit and consequently boost shipments.