Rotterdam Ends Terminal Plan after Russian Partner Cools
Rotterdam, Europe's largest port, said on Thursday that plans to build an oil storage terminal for one billion euros ($1.1 billion) had been cancelled after its Russian partner raised concerns over the project's feasibility.
The project, intended to store Urals crude oil and oil products, was hailed as testimony to strong trade relations between the two countries when it was announced by Dutch Prime Minister Mark Rutte four years ago.
But relations between Russia and Europe have cooled dramatically since the outbreak of a separatist war involving Moscow-backed rebels in eastern Ukraine and the downing of a passenger airliner over rebel-held territory a year ago, with almost 200 Dutch citizens aboard.
The financial position of Russian energy companies has also become more precarious since the signing of the oil terminal deal in 2011, as the energy export-dependent economy has been hit hard by a precipitous decline in oil prices.
The cancellation also comes as the Netherlands and Europe rethink their energy security strategy to reduce dependence on imported Russian energy.
In a statement on its website, Rotterdam port said partner Shtandart TT, owned by Russian investment firm Summa Group, had wanted to reopen discussions on the schedule and quantities of oil products to be stored at the terminal.
"After some talks, it was clear that the best thing to do was end the deal," port spokesperson Sjaak Poppe told Reuters.
Summa said the decision to terminate the contract reflected the changed macroeconomic situation and oil market conditions. It said it remained in a "good relationship" with the port and continued to own a bunker business there.
Under the agreement with Rotterdam, Shtandart would have paid 170 million euros a year to lease the three million cubic meter storage terminal over the next 30 years and the terminal would have generated a further 22 million euros in harbor fees each year, Dutch media reported.
The loss of the project would not have a material impact on the port, said Hamza Khan, energy analyst at Dutch bank ING, who added that the project had been in doubt for some time.
"A Russian-only terminal is going to be less flexible," he said, adding that terminals that were open to different sources of oil were currently more attractive.
Considering the highly dynamic nature of the global oil sector, including that in Russia, and developments in the handling of oil products in Rotterdam, the Rotterdam Port Authority believes it may be possible to develop the terminal concept with another interested party now that the site is available again.
The handling of mineral oil products was up by more than 25 percent in the first six months of 2015. The main reason behind this is an increase in Russian fuel oil that is shipped to the Far East via Rotterdam. The last decade about 30 percent of the crude oil that arrives in Rotterdam comes from Russia. The Port Authority is convinced that the termination of the Shtandart contract will not have an effect on the substantial volumes of crude oil and mineral oil products that are being shipped between Russia and Rotterdam.