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RUSSIA'S BLACK SEA PORTS

by Paul J. Norton

Russia s Black Sea ports, all of which are located in Krasnodar Krai, have increased
dramatically in importance since the dissolution of the Soviet Union in 1991, when
Russia lost numerous ports and billions of dollars of port revenue to new
neighboring countries.  In the Black Sea region alone, Russia inherited just four of
17 Soviet-era ports.  Competitors in Georgia, Ukraine, and the Baltic countries
divert significant amounts of container and bulk traffic.  To compete for today s
shipping, and to handle the increased traffic expected to flow through the region in
the future, Russia's Black Sea ports require significant investment.  

Novorossiysk and Tuapse

Novorossiysk is the most important Russian port in the Black Sea, already handling
30 million tons of crude oil per year--one third of Russia s annual crude exports. 
This volume represents an even greater proportion of Russia's seaborne crude
exports, which last year amounted to 50 million tons, since almost all of the
balance was shipped via Ukrainian and Latvian oil terminals.  The volume of crude
flowing through Novorossiysk will only increase in the years ahead, beginning with
the anticipated 62 million tons to be exported annually from the Tengiz fields in
Kazakhstan.  

Tuapse is Russia s second largest Black Sea port.  Like Novorossiysk, it is a vital
route for the export of crude oil.  Tuapse s traditional traffic pattern also includes
metals, fertilizers, coal, building materials, and foodstuffs.  As trade increases,
traffic at Tuapse is expected to double.  To accommodate this anticipated growth,
the Russian Ministry of Transport has approved a $720 million modernization
project for Tuapse. 

Development Prospects

Today, oil exports out of southern Russia are at or very near the full capacity of
the region's existing infrastructure, and are growing.  To meet this growth, Russia
plans to increase its crude oil export capacity from the current 37 million to 53
million tons.  According to the plan, oil terminals at Novorossiysk and Tuapse will
be expanded to handle 32 million and 8 million tons per year, respectively.   
Oil is not the only force driving these modernization projects.  A Russian port in the
Black Sea region capable of  handling a larger volume of container traffic than
current facilities could save shippers millions of dollars off  the cost of more
expensive rail routes.  Rail shipments to Central Russia and Central Asia from the
Baltic countries, St. Petersburg, and even Finland are becoming less and less
attractive due to additional costs, safety concerns, and transit time.  A proposed
rail link between Kazakhstan and China may someday shorten the route from
Europe to Asia, as well, and eventually generate greater container traffic through
the region.

Other improvements likely at Krasnodar ports include upgrades of existing tank
farms, and expansion of refined product capacity to 3 million tons at Novorossiysk
and 8 million tons at Tuapse.  A new petroleum products pier at Novorossiysk is
virtually complete, capable of handling 1 million tons of fuel oil and 2 million tons
of diesel fuel yearly.  LUKoil plans to commission an oil refinery in the area, as
well.   

Elsewhere in the krai, the first stage of a marine terminal for liquified gas is under
construction near Zhelezny Rog, also on Krasnodar's Taman peninsula.  The first
stage is designed to handle an initial 300,000- 400,000 tons of gas exports per
year.  Capacity will eventually reach one million tons a year.  The new facility is
being built by Neftegaz, with $40 million in credits from foreign and domestic
commercial banks.  

Financing for these projects will come from government and  private sources, as
well as from multilateral development banks like the European Bank for
Reconstruction and Development (EBRD).  The EBRD has already initiated feasibility
studies in the region.  It is also expected to provide Russia with a $300 million loan
to finance the development of these ports.  The Port of Novorossiysk is also
expected to announce international tenders to develop oil, grain, and container
terminals at the port.  For more information about the port of Novorossiysk,
contact Aleksandr Ivanovich Shilovsky, of  the Port of Novorossiysk, at 011 (7)
86134 6-27-44.

Paul J. Norton covers transportation for BISNIS.
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