Ukraine Halts Lukoil's Russian Oil Transit, Slovakia and Hungary Affected

(Reuters) — Slovakia and Hungary said they have stopped receiving oil from key supplier Lukoil after Ukraine imposed a ban last month on the transit of resources from the Russian energy company via its territory.

The move highlights the volatile nature of the remaining Russian oil supplies to Europe via the Soviet-built Druzhba pipeline, the last major functioning Russian oil supply route to the continent.

Both Slovakia and Hungary said they were still receiving oil from other Russian companies despite the halt of Lukoil supplies.

Lukoil declined to comment.

Slovakian oil transporter Transpetrol said on Thursday that deliveries from Lukoil had stopped but supplies from other Russian exporters were arriving in Slovakia via Ukraine.

Ukraine's state-run energy company Naftogaz was not immediately available for comment.

Slovakia's economy ministry said on Thursday that oil deliveries from Lukoil, Russia's second-largest oil producer, have stopped flowing to Slovakia via Ukraine following the company's inclusion on a Ukrainian sanctions list.

"According to data from (Slovak oil transporter) Transpetrol, deliveries of Russian oil to Slovakia were not stopped. The problem is, according to (Slovak refiner) Slovnaft, deliveries of a concrete supplier, Lukoil," the ministry said.

It said Slovnaft had secured deliveries from another supplier, and the ministry was discussing the issue with Ukrainian partners.

Russia continues to supply natural gas to Europe via Ukraine, despite Moscow's invasion in February 2022 and the ensuing military conflict, the largest on the continent since the World War Two.

Hungary's Foreign Minister Peter Szijjarto said on Tuesday gas shipments from Russia to Hungary were flowing unobstructed through the TurkStream pipeline on the Black Sea, but crude oil was no longer transferred by Lukoil through Ukraine.

"Due to a new legal situation in Ukraine, Lukoil is no longer delivering to Hungary, and now we are working on a solution that would allow oil transit to restart as Russian oil is very important for our energy security," Szijjarto said.

Industry sources said some 1.1 million metric tons per month, or some 250,000 barrels per day, of Russian oil have been exported via Druzhba's southern spur, of which around 900,000 tons are almost equally split between Slovakia and Hungary.

The southern branch of the Druzhba pipeline runs via Ukraine to the Czech Republic, Slovakia and Hungary, and has been the primary source of supply for their refineries for years. Rosneft, Lukoil and Tatneft have been the main Russian exporters via the route.

Two sources, familiar with the data, told Reuters that Russia's Urals crude supplies via the Druzhba pipeline to Slovakia have been sharply lower than their scheduled volumes.

They also said that oil supplies via the pipeline to Czech Republic continue as normal, while flows to Hungary are slightly below the planned levels.

Hungary's energy company MOL owns refineries in landlocked Hungary and Slovakia, both of which are fed by the Druzhba pipeline's southern spur. Major investment is needed to diversify MOL's Danube and Slovnaft refineries away from Urals oil.

Lukoil has a term contract with MOL, under which it supplies some 4 million tons of oil per year to Hungary and Slovakia, according to industry sources.

Lack of oil supply from Lukoil makes it difficult for MOL, and particularly its Slovnaft refinery, to continue stable operations, one of the sources said.

MOL's Duna refinery in Hungary has more options to import crude oil, such as by sea from the Omisalj port in Croatia. Slovnaft has to rely almost solely on Russian oil flows through the Druzhba pipeline due to its landlocked position.

Szijjarto said on Tuesday that a legal solution that MOL is working on would allow Lukoil to transport crude oil to Hungary through Ukraine and Belarus.

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