* Russia to bar sales of Euro II low-grade gasoline
* Russian refinereies behind with upgrade schedule
* Putin says no slack for oil refiners
* Russia may import fuel from Belarus
By Maxim Nazarov
MOSCOW, Nov 29 Top oil producer Russia risks
gasoline shortages next year as its refineries fail to keep up
with tighter emission standards, which could embarrass President
Vladimir Putin and force Moscow to send Belarus more cheap crude
in return for fuel.
Russia has insisted on introducing cleaner gasoline
requirements although many of its refineries have not been
upgraded and Putin's government needs imported fuel to avert
politically damaging queues at the pumps.
This will weaken Russia's hand in annual talks with its
ex-Soviet neighbour Belarus, which exports gasoline and diesel
refined from subsidised Russian crude oil deliveries and wants
more to bolster its struggling planned economy.
Russia has already made its crude-for-products offer but
Belarus is holding out for a steep increase, creating
uncertainty for Europe's oil market, which lost pipeline
supplies to Europe via Belarus during a price dispute between
Moscow and Minsk in 2010-2011.
"The situation in the spring of 2013 will be quite similar
to what we had in 2011: constant crisis meetings, daily
supply/demand calculations, accounting for every tonne at every
petrol station, just to keep the fuel flowing from the pump," a
Russian oil products trader said.
If that scenario arises next spring, it is likely to fuel
discontent among voters who recently returned Putin to the
Kremlin for a third term as president but amid street protests.
The problem has arisen because Russia will phase out Euro II
gasoline and diesel, out of circulation in Europe since 1996,
from the new year to come closer to EU emissions standards and
spur output of quality fuels to meet rising domestic demand.
This year, Russia's Energy Ministry has estimated that the
change in gasoline specification to reduce emissions of sulphur,
a cause of lung disease and acid rain, would exclude 800,000 to
1 million tonnnes from Russia's gasoline pool, around 2.7
percent of annual consumption.
Russia's previous attempts to exclude Euro II gasoline have
aroused political tensions in the run-up to elections and have
led to postponements.
BELARUS NEEDS MORE
Russia holds out the prospect of increased deliveries next
year if Minsk guarantees to send gasoline back to Russia and it
already unexpectedly increased crude oil supplies to Belarus for
November and December.
"The guaranteed return of gasoline will be an important
condition of determining the amount," a source close to the
Belarus, its economy still recovering from a
balance-of-payments crisis in 2010 that necessitated a Russian
bailout, needs the crude to run its two refineries, key earners
of hard currency revenues through diesel and gasoline exports to
Belarus is asking for 23 million tonnes of crude oil, or
about 460,000 bpd, up from 21.5 million tonnes promised this
year. Russian officials say the volume has yet to be agreed.
In an interview with Reuters this week, Belarus President
Alexander Lukashenko said Russia was offering only 18 million
tonnes, an effective cut.
"We have agreed with Russia on everything with the exception
of 4 to 5 million tonnes of oil. We would like to refine 23
million," Lukashenko said.
Russian oil producers, which own almost all country's
refineries, have fallen behind on refinery upgrades.
State controlled Rosneft is the largest producer
of Euro II gasoline and has not kept up with upgrades, while
some other refiners have upgraded to make Euro IV and V.
Seasonal factors are likely to heap pressure on the gasoline
tightness in spring as high summer demand approaches.
To illustrate the seasonal rise, in 2012, Russian domestic
monthly gasoline deliveries rose to 3.235 million tones by
August from a minimum of 2.66 million tones in February,
climbing by an average of 100,000 tonnes per month.
One oil company source said that the ministry's calculation
of up to 1 million tonnes being lost to the gasoline pool under
the proposed transition from Euro II may well prove to be
"The energy ministry's estimate was based on the companies'
plans and promises to switch from Euro II to Euro III while
maintaining and even increasing volumes," the source said.
"But what is really going to happen? Someone won't manage in
time, someone will have a refinery accident, and suddenly the
deficit will be more than a million tonnes," another oil company
Putin has said he will not cut refiners any more slack.
"We have pushed back the introduction of new (fuel)
standards as some industries had not been ready for it," he said
last month at a meeting of regional officials in Yaroslavl, an
industrial city which has a large, relatively modern refinery
producing Euro V fuels.
"But we can't postpone it indefinitely."
(Reporting by Maxim Nazarov; Writing by Vladimir Soldatkin;
Editing by Anthony Barker)