Russian market of Oil Transportation via Rail in 2012

The report of Igor Kurotchenko, Head of IPEM Freight Transportation Research Division, at the International Conference “Rail Deliveries of Oil Freight in Russia: Peculiarities of the Current Stage” in Moscow, 26/03/2012

Implementation of Price List 10-01 and creation of new tariff conditions which leaded to reduction of payback period of tank cars by 5-6 years resulted in freight operators (owners of freight cars) increasing their presence in this market segment. Accordingly, after private investments began to flow into railway transport, tank cars’ average age reduced from 22.7 years to 16.5 years in 2003-2012. A steady surplus of rolling stock had become visible by 2010-2011. Market of oil freight deliveries can be attributed to highly competitive markets according to all indications. Still this market is quite specific as the number of shippers and consumers is limited, and there is not only an intraspecific competition but also an interspecific competition (strong competition between pipeline and railway transport).

The launch of “Eastern Siberia – Pacific Ocean” (VSTO-2) oil pipeline effected rail transportation. In 2011 the volume of oil freight transported by railways on the Amur Region – Primorsky Region (Skovordino station) route accounted for 15.4 mln tons, but after the launch of the pipeline several thousands of tank cars will possibly become empty and available.

The launch of VSTO-2 is a serious threat to rolling stock market, but there are also a number of smaller projects that will strongly influence the market of tank car transportation. In particular, launching of Yaya oil refinery in Kemerovo Region (with capacity of 6 mln tons of oil per year and 93% level of refining) will reduce dependency of the region on motor fuel supplies from other regions. Yaya oil refinery will be connected to the Aleksandrovskoye (Tomsk Region) – Andzero-Sudzhensk – Irkutsk main pipeline. When the oil refinery is launched, Kemerovo Region will be almost fully provided with oil products, which will result in hundreds of tank cars becoming empty.

As for the expansion of Antipinsky oil refinery (Tyumen Region), one of this project’s main goals is increasing refinery’s capacity up to 7 mln tons of oil per year with maximum level of refining and producing oil products compliant with Euro-5 standards. According to IPEM estimations the volume of freight traffic to Tyumen Region will decline, region’s demand for diesel and gasoline will also decline, but the volume of oil products produced in Tyumen region will increase.

Launching of these projects will also result in making a stock of tank cars available:

• Construction of Tikhoretskaya – Tuapse-2 oil pipeline
• Construction of Achinsk – Kemerovo – Sokur oil products pipeline, expanding of Sokur –Priboy oil pipeline
• Construction of Syzran – Saratov – Volgograd – Novorossisk main oil products pipeline
• Increasing capacity of Kirishi – Primorsk main oil products pipeline
• Construction of Kstovo – Nagornaya (Moscow) main oil products pipeline

In the long term not only the potential freight base will decline in several regions but cars’ payback period will also be extended, shipping periods will decline. Senders of oil freight and operators will have to put up with problems of bulk and fixed-route oil freight transportation due to inefficient transportation of other kinds of rolling stock. The problem of traction deficit. Today there are two main reasons for locomotives’ deficit at rail network:

• Changing the principles of car management (maximization of profits to the detriment of technology) which lead to technological lack of locomotives
• Systematic understatement of tariffs indexation (lack of recourses for investment including purchase of locomotives in order to cover the rising volume of traffic)

Ineffective management of rolling stock leads to additional burden on locomotives. Until 2007 dynamics of performance indicators, number of locomotives issued for trains and average daily operated locomotives stock used to be strongly dependent on each other, because most of locomotives were being managed according to the single stock technology. It was easier to plan the volume of required stock for the long-term period and number of locomotive supplies for the train.

However, after inventory stock was reduced, the volume of freight base did not any longer affect the loading of locomotives. The reason is as follows: as rolling stock became private hundreds of operators started to manage and plan empty stock routes. Railways’ performance indicators declined by 15% while burden on locomotives raised by 13% in 2011. According to IPEM calculations, ineffective management of rolling stock led to the present situation when RZD JSC has to maintain much more locomotives on a daily basis which should cover the lack of cars’ efficiency. Thus, existing traction deficit is caused by technological inefficiency, and the number of locomotives is sufficient but only if the rolling stock is managed more effectively.

At the moment planning of locomotive purchases is hard as the volume of required stock has no connection with the volume of freight base. A new model of planning locomotives’ purchases is required. Purchases of new locomotives, especially for private use, will not solve the problem of traction deficit if cars’ transportation is inefficient.


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