Transit on wheels – new opportunities for universal port

By Yelena Narushevich, Ventas Balss

The beginning of 2003 presented a serious challenge to port Ventspils in north-western Latvia. Liquid cargo used to account for more than 70% of total turnover at this port, but has now been cut off from crude oil pipeline supplies altogether from Russia since mid-December last year. Nevertheless, cargo turnover in the first two months of this year show that the oil terminals at Ventspils are not standing idle. Moreover, cargo handling is even increasing. The port found a way out of the dramatic situation by switching focus on cargo supplied by rail

Photo: Ventspils Nafta

The actual and potential capacity of Ventspils port in accepting and reloading shipments arriving on wheels was discussed in this interview with Aivars Lembergs, the city mayor and board chairman of the Ventspils port and also president of the Latvian Transit Business Association.

Railway transit in three dimensions

What are the current capacities of Ventspils in handling liquid cargo delivered by rail?

Ventspils port capacities in handling railway cargos have to be considered in three dimensions – technical, economic and political. The technical capacity of Ventspils to accept oil and any other cargo supplied by railway depends, first of all, on the capacity of the Latvian railway company.

A few years ago when I was a state trustee on the council of the state-owned Latvijas Dzelzcels (Latvian Railway) company, we looked at several projects for the development of railway capacity. An increase of throughput on the stretch from Latvia's eastern border to Ventspils port was one of the priorities set then. This project is being implemented now, and this year Latvijas Dzelzcels will already achieve maximum capacity of deliveries to Ventspils on 35 million tons instead of 20 million tons earlier.

At the same time, we are also working to expand railway facilities at Ventspils. This June a new railway station, Juras Parks, with annual capacity of 12 million tons will be put into commission. This station will serve the chemical terminal of Ventamonjaks and the oil product terminal of Ventbunkers. This project was coordinated also with development of capacities at these terminals.

Regretfully, the possible growth of oil deliveries to the Ventspils Nafta terminal by rail had not been considered earlier. Basically, the focus was on crude oil supplies via the pipeline, while railway cargos remained in the background. As a result, the terminal's current reservoir capacity exceeds the capacity of railway trestles for unloading rail cars, which in turn is higher than the capacity of railway access roads used to bring tank cars to the terminal.

In view of the situation at Ventspils Nafta terminal in the first quarter of this year when no oil was supplied to Ventspils through the pipeline, further development of capacities for both Latvijas Dzelzcels and Ventspils port railway facilities in respect to deliveries for Ventspils Nafta oil terminal will depend on the resumption of deliveries by pipeline, if any, and the amount. For now there aren't any definite answers to these questions.

Contrary to the EU directives and principles of market economy you mentioned also economic factors affecting Ventspils port capacity in handling oil and other cargo brought in on wheels.  

I would name several economic aspects influencing the handling of railway cargo at the port. Firstly, this would be the fact that in Latvia subsidies to passenger railway transportation in the amount of 12 million lats a year come from profits made by railway cargo transportation, thus pushing up the costs for cargo transportation by the Latvian railway.

Under EU directives, such a situation is inadmissible. If the state believes that passengers should be carried for low fares, it will have to subsidize passenger transport from its own budget. This problem is supposed to be solved in Latvia by 2003-2004. For now, there are no such state subsidies and railway rates may not be raised any higher. There is not enough money to invest in infrastructure, and the railway is facing certain problems in bringing in or taking out extra cargo.

Another economic factor influencing railway cargo flow to Latvian ports is closely tied to political factors and manifests itself in the Russian territory. It is the rate difference per ton, depending on the direction the cargo is sent to. Upon equal distances, the rate for transporting cargo through Latvia, Estonia, Lithuania and Finland is much higher than rates applied to other directions.

This situation runs counter to the principles of market economy. It is vital for us to know whether the rates will be leveled out and, if so, when this will happen. Depending on this, various approaches have to be taken to the devel?pment of both Latvian railways and terminals on the Baltic Sea coasts within the EU borders.

Brothers in transit 

Do you think Ventspils port has kept its traditional advantages by betting on handling railway cargo

This previous freezing winter made all men of reason think again as to why no major terminals for handling mass cargo were built in the Gulf of Finland during the Soviet era. All terminals were built on shores of the open Baltic Sea, even if it made construction more complicated.

In the end it is the consignor, who has to pay for an ill-considered location of a terminal, because high freight costs make his goods uncompetitive on the world markets price-wise. Moreover, there’s no guarantee of regular deliveries, and this is another threat to the competitive ability of export goods: if they do not reach the consumer in time, their place will be taken by different, but equally good products from other regions.

What are the closest prospects for Ventspils port in handling railway cargo?

If railway rates for the transportation of cargo by Russian railways are leveled out, the current capacities of Ventspils railway facilities and Ventspils port terminals will not even be enough to handle all the potential railway cargos. But we do not know when this may happen because the deadline for equaling the rates has been postponed several times already.

If terminals at Ventspils are not expanded, there will be a risk of large shipments never reaching their buyers, considering the fairly restricted capacities in the Gulf of Finland, which is blocked by ice in winter. This winter there were already measures taken in Finland to restrict shipping in the gulf. One should also bear in mind that the Danish Straits are likewise controlled by the EU.

In my opinion, it is very important for Russia to have reliable allies in the transit of its cargo through the EU territory. Estonia, Lithuania and Latvia (after they join the EU), and Finland could become such allies. These countries, being part of the transit route for Russian exports, could lobby for Russia’s interests while in the EU. But for this to happen, transit needs to be continued and developed.

We not sitting idle, waiting for better weather at sea…

The largest Baltic oil terminal, Ventspils Nafta in Latvia, is not standing idle, even  when it has not been receiving any Russian export oil through the Samara-Polotsk-Ventspils pipeline since mid-December last year…

Janis Adamsons Photo: Ventspils Nafta

Janis Adamsons, president of Ventspils nafta:

�The situation was arranged by the Ventspils Nafta management, who were not sitting idle all this time but worked actively on expanding the terminal’s range of services and cargo it handles. The Ventspils Nafta strategy envisages active development of services that do not depend on a dictate from Russian oil pipeline system managers.

After a break of some 20 years, Ventspils Nafta terminal again started accepting and reloading crude oil delivered by railway at the end of last year. The amount of crude oil handled in this manner is growing rapidly, topping 0.3 million tons in first two months of this year.

Early in the year Ventspils Nafta stevedore company boasted record-high handling of oil products supplied by the railway – crude oil, diesel fuel and  various kinds of gasoline. This February cargo handling by Ventspils Nafta was more than 1.1 million tons. All these shipments arrived at the terminal in tank cars by rail. 

The first two months of 2003 convincingly demonstrated the advantages of Ventspils, including the Ventspils Nafta terminal, specifically their universal qualities, allowing for equal efficiency in receiving and reloading cargo in any weather, as it happened this winter when extremely cold weather put ports in neighboring countries out of business, covering them with ice.

This year Ventspils Nafta will continue upgrading its terminal and adjusting it to new types of cargo. The ultimate goal of these efforts is to increase to maximum reloading of crude oil and oil products at the terminal. To this end, the terminal will build a new railway trestle for unloading tank cars and also expects to diversify the assortment of oil products it can handle. In particular, the company offers its clients to reload diesel fuel of various sulfur content levels. Investments in upgrading and development of the terminal this year will reach some 8 million lats.�