Bulgarian fuel exports to Ukraine exploded last year. Local traders exported stock worth a record 1.7 billion levs. Sales then came to an abrupt halt in February 2023 and subsequently resumed at a lower rate, with around 520 million levs worth of diesel going to Ukraine from the beginning of the year to the end of August. Since the beginning of November this year, however, the Ukrainian door for Bulgarian fuel of Russian origin has now officially been shut.
The reason is that the vast majority of Bulgarian oil bases have been put, figuratively speaking, on the Ukrainian blacklist of the Security Service of Ukraine (SBU). Burgas, Varna, Ruse, Plovdiv, Byala are among the locations under increased surveillance.
According to industry representatives, the last domino fell at the beginning of November, when Georgi Samuilov's Insa Oil base in Belozem was included in the list. The company had record revenues of almost 2 billion levs last year, importing finished fuels from Russia and purifying the gas through its sulfur-treatment plant in Belozem, which could then export the resulting diesel to Ukraine. Bulgarian companies can still export to Ukraine, but only if the fuel is proven not to be of Russian origin and does not come from blacklisted locations.
The blacklist
Information on Ukrainian restrictions is available on the enkorr website, which monitors oil market dynamics. As of 5 October, a list of 32 refinery locations, terminals and bases can be seen there, half of them in Turkey, 9 in Bulgaria and one or two points each in Algeria, Saudi Arabia, the United Arab Emirates, the Giurgiulesti oil terminal in Moldova and Kakinada, India.
The attempt to close Ukraine's doors to Russian fuels began in late 2022-early 2023 by blacklisting several Turkish ports. In practice, this means that if fuel comes from a blacklisted location, the Ukrainian customs would require a full history of its origin and route to its final destination. It will also be sampled by Ukrainian energy customs authorities, which takes 14 days, during which the tanker will be hitched. If non-compliance is detected, the fuel and vehicle will be impounded, making imports from the listed locations unattractive, expensive and risky.
At some point Bulgarian locations appear on the list, starting with Burgas, Varna, etc., according to industry information. On 17 October, Ruse entered the list, and all the bases there, as well as in the other locations, are placed under a common denominator, without distinguishing between the different warehouse operators. This is now causing problems for companies that would like to export fuel to Ukraine produced in Greece, for example, as there is no way of avoiding a thorough inspection and this makes exports too slow and complicated.
At the end of October, the portal reported on a situation with around 190 vehicles blocked in Ukraine waiting for fuel samples to become ready. Those inspected were importing fuel from Bulgarian sea and river terminals and ports identified by the SBU as risky locations for the shipment of Russian-origin oil products.
The listing of Insa Oil's base in Belozem in the first days of November was, in fact, the last domino to fall. News of it came on 2 November, and was published on the enkorr website. "Shipments of diesel fuel from the town of Belozem (Bulgaria), where Insa Oil's oil depot and refinery are located, will be subjected to a thorough inspection starting November 2. The Security Service of Ukraine (SBU) has sent an alert and a corresponding request to the Energy Customs," enkorr reports.
The big importer from Belozem
Samuilov's Insa Oil has, in fact, proved to be the main alternative to Lukoil for importing fuel into the country since the beginning of the war. He told Capital weekly about a year ago that he imported about 1 million tonnes of fuel for 2022 and held 25% of the market, with imports coming from Russia. In this period, he effectively used the derogation given to the country on the import of finished products. According to him, his company exported 30-40% to Ukraine and the rest were domestic supplies. Insa Oil has a refinery in Belozem, where it has a plant for sulfur treatment of gas oil fractions. According to market information, Insa Oil's imports are through large international traders and are of diesel and gasoil, with the latter going through the sulfur treatment plant and coming out Euro-5 diesel, which counts as of EU origin from then on.
The past year, precisely because of the Ukrainian niche, has been a strong one for Insa Oil, which also has three storage licenses in Belozem, Ruse and Burgas. The company has revenues of 1.9 billion levs for 2022, which ranks it fifth in the ranking of the largest in the fuel sector. By comparison, the Lukoil Neftohim Burgas refinery, which had 2.1 billion levs for the year (it was still operating on a shoestring), is in 4th position. For Insa Oil this is a 109% growth. The profit was 18.9 million levs. Several other companies of the businessman, whose career has started from the structures of the Multigroup consortium and who allegedly benefits from the protection of MRF mogul Delyan Peevski, have additionally cashed in on the lucrative niche.
The end of the Ukrainian fairytale
The export boom of fuel from Bulgaria to Ukraine started at the beginning of the war - there was a shortage of diesel in neighboring Romania and Bulgarian traders were flooded with inquiries from Ukrainian players. Meanwhile, Lukoil Bulgaria's pricing policy made the domestic market unattractive on a margin basis. The better wholesale price relative to other neighboring markets has singled out exports as a major profit area for local oil companies, which have turned to exports. The country was given a two-year derogation to import oil and finished petroleum products from Russia. Exports of diesel from Bulgaria to Ukraine were also listed as allowed for the next two years in the EU's ninth sanctions package.
Thus, 2022 turned out to be a record year for fuel exports to Ukraine - both in terms of quantities and amounts. The sales were made by Bulgarian companies - warehouse keepers and exporters who bought fuel on the local market from the wholesaler Lukoil Bulgaria. As well as single companies that played independently, organizing their own imports of diesel and gas oil from Russia through traders. I.e. Georgi Samuilov's Insa Oil, which stood out as the largest exporter based on market data volumes.
National Statistics showed that in 2022 fuel exports to Ukraine were almost 1.7 billion levs, of which over 80%, or 1.4 billion levs, came from diesel exports. In terms of volume, this is a total of 737,000 tonnes of fuel, of which 83%, or 615,000 tonnes, is diesel. Since February this year, the quantities and amounts have been drastically decreasing (see chart). However, there are still exports, with diesel exports totaling 521 million levs for the months January to August inclusive, and 325,000 tonnes in terms of quantities.
In the meantime, however, Ukraine has begun to follow a more restrictive policy than the EU on Russian fuel entering its territory, leading to the current slamming of the door. Either way, Bulgaria is due to reduce its dependence on Russian oil and fuel to zero within a year, so this will usher in another period of re-alignment for the oil map.
Bulgarian fuel exports to Ukraine exploded last year. Local traders exported stock worth a record 1.7 billion levs. Sales then came to an abrupt halt in February 2023 and subsequently resumed at a lower rate, with around 520 million levs worth of diesel going to Ukraine from the beginning of the year to the end of August. Since the beginning of November this year, however, the Ukrainian door for Bulgarian fuel of Russian origin has now officially been shut.
The reason is that the vast majority of Bulgarian oil bases have been put, figuratively speaking, on the Ukrainian blacklist of the Security Service of Ukraine (SBU). Burgas, Varna, Ruse, Plovdiv, Byala are among the locations under increased surveillance.
