Economic Intelligence Report
PETROLEUM PIPELINE TRANSPORT FROM THE USSR TO POLAND, EAST GERMANY, CZECHOSLOVAKIA, AND
CIA/RR2
CENTRAL INTELLIGENCE AGENCY Office of Research and Reports
SECP.EX
Economic Intelligence Report
PETROLEUM PIPELINE TRANSPORT FROM THE USSR TO POLAND, EAST GERMANY, CZECHOSLOVAKIA, AND HUNGARY
CIA/RR
N G
This malerloMtoiilftins information affecUne the National Defense of the United States within Vap meaning of tlietaws.TJSC,. therevelation of whlctf ln any manner to at/unauthorised person Isifrohlbitedaw.
CENTRAL INTELLIGENCE AGENCY Office of Research and Reports
F0REWOi<i>
During the period of the Seven Yearhe USSR expects to double its exports of crude oil to Poland, East Germany,and Hungary. In order to transport this crude oil at the lowest possible cost and to relieve the demand on other modes ofa pipeline is being constructed from the petroleum-producing area near Kuybyshev in the USSR to refineries in these four European Satellite countries.
This report attempts to assess the investment in money and materials that vill be required to construct the pipeline, to evaluate the impact of the pipeline on other modes of transportation, to compare the cost of pipeline transport with other modes of transportation, and to give some indication of the economic and strategic significance of the
Page
Summary and
I.
II. Planned Development of Pipeline
for
and Characteristics of the Pipeline System
of
III. Probable Effects of the Pipeline on Other Modes of
Water
European
Satellite Transportation Systemhole
IV. Comparative Freight Rates for Transportation of Crude Oil,
by Mjde of
.
All Modes of
V. Economic and Military Strategic Significance of tbe
Appendixes
Appendix A. .
Appendix C. Source
Tables
Production and Imports of Crude Oil in Poland,
Eaot Germany, Czechoslovakia, and5
Carrying Capacity of the Pipeline System Con-
necting the USSR uith Poland, East Germany, Czecho-
clovakia, and
Refineries Under Construction in Poland, East Germany,
Czechoslovakia, and56
U. Investment in Construction of the Pipeline Connectinguith Poland, East Germany, Czechoslovakia,by
^. Requirements of Pipe for the Pipeline Connecting thePoland, East Germany, Czechoslovakia, and
Deliveries of Crude Oil by Pipeline from the
USSR to Poland, East Germany, Czechoslovakia, and
Hungary,
of Demand for Transportation of Crude Oil and
Petroleum Products in Poland, East Germany,and0 and
6. Comparison of Hates for Transporting Crude Oil from Kuybyshev, USSR, to Rcrineriea in Poland, EastCzechoslovakia, and Hungary, by Mode of Trans-
portation
Mar,
Crude Oil Pipeline System from the USSR to Poland, EastCzechoslovakia, and Hungary following pan"
- vi -
PETROLEUM PIPELINE TRAffSPORT iVm THE USSR TO POLAND, EAST GERMANY.ND KUKSARY*
Summary and Conclusions
A petroleum pipeline system is under construction that extends from the principal petroleum-producing area in the USSR, near Kuybyshev, to refineries in Poland, Bast Germany, Czechoslovakia, and Hungary. The entire system is scheduled for completion by the end3 and probably vill be put into operationU. The pipeline is designed to deliver aboutillion metricf crude oil per year to these fourwhen all pumping facilities are installed. Thie amount is veil above the refinery capacity that vill exist in these countries3 and exceeds theillion tons of Soviet crude oil planned for export by pipeline to these countries it is probable, therefore, that Initial operation of the pipeline will employ sufficient pumpingto supply refineries5 and that additional pumpingwill be installed thereafter to bring the system up to its full capacity when new refineries that are nov under construction areprobably
This project, which is under the auspices of the Council for Wjtual Economic Assistancerobably is the most ambitious single economic project ever to be undertaken jointly by members of the Soviet Bloc. of the pipeline will require an investment of0 million,ercent of which will be invested in the Soviet sections.
The pipeline will beilometers (km) inm of which will be in the USSR. It is estimated thatons of pipe will be required for the project. Progress on construction in the Satellites' has been rapid, but delays havo occurred in the Soviet section, where there has been some difficulty in obtaining large-diameter pipe.
estimates and conclusions ln this report represent the best judgment of this Office as
** Unless otherwise indicated, tonnages are given in metric tons throughout this report.
nless otherwise Indicated, dollar values are given In current US dollars throughout this report.
otherwise indicated, tne term Satellites in this reportto Poland, East Germany, Czechoslovakia, and Hungary.
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Completion of the pipeline system probably will terminate theof crude oil by railroad from the USSB to the four Satellites at least, and will certainly reduce this movement byfrom East German and Polish seaports to the Satellite refineries. The increase in refined products in the Satellites will cause andemand for internal transport there.
The transportation of at leastillion tons of crude oil byfrom the Soviet oilfields to the Satellite bordersistance ofm) would require the continuous employment of0 Soviet tank cars. This figure is believed to be the minimum number of tank cars required under the most optimum conditions, with tank cars movingpeedm per day and5 days forunloading, terminal handling, and switching en route. Inore cars would be required to complete the haul from the Satellite border to the refineries. This total0 tank cars, representing an investment of0 million, is noreercent of themaximum cost of constructing the pipeline.
U> .
A comparison of the estimated costs of pipeline .transport with those of any other mode of transportation from Kuybyshev to the Satelliteat current rates shows.that pipeline costs are lover byoercent. If the volume of crude oil movement by pipeline planned5 is achieved, the saving in annual transportation expenditures to the Satellites by use of pipeline rather than rail transport will enable these countries to recover their investment in pipeline constructionemarkably short period of time. The rate at which the USSR will be able to recover its investment is less clear because, although it is more likely to retain its substantial savings in transportation expenditures, it might decide to pass them along to the Satellites in the form of lower prices for Soviet crude oil.V
There Is no evidence that the pipeline is Intended for any otherthan the supply of crude oil to the Satellites. The pipelinewill increase the supply of military fuel available in Eastern Europe and, by relieving the railroads of the burden of carrying the crude oil vill improve their capability to carry other economic and stratecicerials.
I. Introduction
Int the tenth session of the Council for Mutual Economic Assistancehich was held In Prague, Czechoslovakia, an agreement was concluded by the USSR, Poland, East Germany,and Hungary torude oil pipeline system to connect the oilfields ln the Urals-Volga region of the USSR vithin the four Satellite countries concerned. Tho movement of petroleua through this pipeline system is expected to total aboutillion tons per year
The principal reasons given as justification for the pipelineare the increasing demand for petroleua ln the Satellites, the high coats of railroad transport, and the desire toetrochemical industry in the Satellites, Completion of the pipollne will maketo the Satellites increasing quantities of low-priced oil that will vie with coalrimary source of energy. The effects on the future development and exploitation of other modes of transportation,railroad transport, are significant and probably will be beneficial to all countries concerned. The Satellites, however, will have increased their economic and political dependence on the USSR.
IT. Planned Developeent of Pipeline Transport
A. Demand for Petroleum
50 the USSR increased its production ofbyercent. Domestic consumption, however. Increased by onlyercent, thusonsiderable surplus of petroleum for export. In the Satellites the situation is reversed. The rupld rate of industrialization and the growing Importance of petroleumrimary source of energy liavc necessitated the Importation of petroleum inamounts. With the exception of Rumania and Albaniu, the European Satellite countries are dupendent on outside soutccb for their majorof crude oil. Poland, East Germany, Czechoslovakia, and Hungarythe preponderance of their supply from the USSR. Soviot exports of crude oil to these four countries5 amountedillion tons andillion tons. oviet exports of crude oil to these four countries by pipeline are expected to reachons, or aboutercent of the total imports of crude oil planned by those countries5 (see.
The origin ofillion tons of crude oil to be Imported in excess of the Imports free the USSR is not clear. Rumanian plans
* ollows on p. h.
5 do not provide for the export of crude oil to any other Satellite*. It Is entirely possible thatillion tons also will come from the USSR, although both Albania and Austria havecrude oil to these countries In the past.
Table 1
Planned Production and Imports of Crude Oil ln Poland, East Ccrmany, Czechoslovakia, and Hungary
Million Metric Tone
Planned
b/
Eastc/
d/
Hungary
7
ai nurQered source references, see
c' Hi
d! y
It. nnl Characteristics ofystem"
The plpellna cyotcra now under construction will originate at Kuybysliev in the Urals-Volga producing area of the USSR and will extend wostward to Mozyr'. At Mozyr* the line separates into two branches, one of which will run through Brest to Flock in Poland and terminate at Schwodt in Bast Gormany on the west bank of the Oder River. The other branch will run through Brody to Uzhgorod on Uie Czechoslovak border and thence westward to Sony, Czechoslovakia. At that point it separatee into two spurs, ono of which will terminate at Bratislava, Czechoslovakia, and the other ot Szozhalor&batta, near Budapest, Hungary.** This pipeline system has been designed exclusively for the raoveaent of crude oil. The
See the top, following p. k, and Tablehlch follows on p.* Hungary also plans toko link to connect this pipeline with an existing line thatnail refinery at Stony near Budapest. 5/
CRUDE OIL PIPELINE SYSTEM FROM THE USSR to Poland, East Germany, Czechoslovakia, and Hungary
principal characteristics of each of the sections of the pipeline system are shown in Table 2,
Table 2
Estimated Carrying Capacity of the Pipeline System Connecting the USSR with Poland, East Germany, Czechoslovakia, and Hungary af
Brody)
slava
Sahy)
CapacityMetricYear)
k$ to
otherwise indicated, all data are from source
carrying capacity of the Uo-inch section is tonnage thatclaims will be pumped through the line when all pumpinginstalled. JJ The capacities of all the other sections are thefor which pipelines of the diameters shown are normallyand utilized in the USSR, 8/
In actual proctico the capacityrude oil pipeline system dependsumber of factors, including the diameter of the pipe, tbe capacity and.spacing of pumping stations, and the temperature andof the crude oil. The capacities shown inre well below the throughput delivery practices in the US for pipelines of equal9J Therefore, the pipeline system under construction probably will be adequate for transportation of theillion tona of crude oil planned for export to the four Satellites
It is planned that the entire pipeline system will be completed by the endut the system probably will not be put into operation
;.untll sometimeh. The scheduled completion dates, byas follows
r'
Mozyr1-Uzhgorod (via
via
Construction of the sections In the Satellites appears to be on schedule. The section from Brody in the USSR to Bratislava,was completed in1 and placed in operation inS. For the present, railroad tank cars will transport crude oil to the eastern terminus at Brody, at which point the crude oil will be transferred to the pipeline system. By the endore thann of the Hungarian section had been completed, and construction wae progressing at the ratem per day. Mare than 2O0 km of the Polish section had been completed by the endI. Three construction crews are working on the Polish section, and they plan tom Very little construction is required in East Germany, and there is no evidence that construction has been started, although dualinch pipes have been laid across the Oder River. Information on the amount of progress on the Soviet sections is not available. Moreover there is no evidence that construction has yet been started onnch section from Kuybyshev tolthough considerable construction is planned
.. t0 Process the planned increase in imports of crude oil,
the four Satellites are constructing new refineries or, as inIncreasing the capacity of existing refineries at the western
" n to the Satelliteipeline is being laidsome time from Unecha (in the USSR on theotBk, thence to Klaypeda in the Another line, from Polotsk to Ventspils, in the Latvian SSR.and may be under construction. Both Klaypeda andports on the Baltic Sea, permitting export of crude oil byto the Scandinavian '
he Czechoslovak sector be ex-
tended from Bratislava to refineries in the western part of thatPardubice, Kolin, and
terminals of the pipeline system. The location and planned capacities of the new refineries are as Indicated in Table 3.
Table 3
New Refineries Under Construction in Poland, East Germany, Czechoslovakia, and58
Metric Tons of Planned Capacity
Plock, Poland Schvedt, East Germany Bratislava, Czechoslovakia Szazhalombatta, Hungary
Total
The annual capacity of refineries currently in operation in these countries is aboutillion tons. This existing capacity, together with tneillion tons of new capacity indicated in Tableould resultotal ofillion tons of capacityhich will be more than adequate to process the domestic production and Jjnports of crude oil planned
C. Investment Costs
The total cost of construction ofm pipeline system is estimated to be0 million0 million, distributed byas shown in This estimate is based on an arbitrarytbat the cost of construction In the Soviet Bloc will be similar to the cost of construction ln the US but will not be more than the cost of construction in the USSR. The average cost of constructionile of pipeline of all sizes constructed in the US00 per
luding the cost of pipe. InIf, oODstrwtion, including pipe, was
er kilometerinchubles per kilometer
Table ii follows on p. 8.
indicated, all values are given in old rubles (beforeI currency reform). The ruble-dollar ratio in the construction field Iso 1. All values relating toare converted at this rate, and all other values are converted at the rate of <txcrwmgeuble* to
mZsX^
Table "i
Investment in Conatraction of the Pipeline Connecting the USSR uith Poland, Eastzechoslovakia, and Hungary
by Section *
ae-jaaai US 8)
Section
USSR
Kuybycflev-Rjzyr'
Satellites
Brcet-Plock
Floifc-Scavedt (Poland
(meter
on.:
-A
a*
9-
Per Kllcmator */
62
U. V
0
Knxlmsi
0
Percent of Total Mutlnus Cost
t
J2z6 loo.o
the nctncdology, Appendix A.
and nlnlxnia cnterinl and construct lea-Installation coete tcultlplled by tdlometsre of line to ba Installed. Totalcosts for construction of tbe pipeline are based on unrouDded data.
section froa Kuybyshev to Hozyr' vlll serve Soviet refineries aod seaports as veil as those of the Diropean Satellites.
all butoo of this section of pipeline are In Poland, the pipeline eervea Bast Ceraany exclusively.
Inch line,ubles per kilometerInch These costs would represent,er kilometerinch, and 2fc-inch pipelines, Aboutercent of the total cost of construction will be Invested lna of line vlthln the USSR, andercent will bo invested In the four Satellites concerned.
It has been claimed that this investment, the largest singleproject ever undertaken byill be recoveredew years of operation because of the substantial savings lncosts compared with the principal alternative mode of transportation, the railroad.' Each country is to construct, own, and operale thatof tho pipeline crossing its territory and will charge transit fees for all petroleum flowing through that portion on route to another
Bast Germany has been called on to assist Poland byoon to finance all of the construction ofm section from Plock to Sehwedt. lj/ Although that section Is on Polish territory, it will serve Bast Germany exclusively, and presumably Poland has balked at the initial outlay of funds free which it will realize no Immediate return. East Germany also will assist Poland in financing tho construction ofm section from Brest to Plock, the Justification being that the line would have been smaller and less costly if lt bod been planned to bo uied only by Poland. Ik/ The loan for both sections willycar period, partly in goods and partly In reduced charges for transportation of petroleum through the It la possible that similar arrangements have been made between Czechoslovakia and Hungary,arge portion of the line that will serve Hungary runs through Czechoslovakia. Moreover, as the over-all project ic sponsored by CEMA, It lo entirely possible that the USSR is providing some financial aid to all of tbe four Satellites, although there is no definite evidence of this assistance. The lack of more accurate cost dataore definitive analysis of the investment program for this project. the large volume of crude oil to be transported, however, thein transportatIon costs compared with costs by other modes ofand the investment that would be required in other modes of transportation If the pipeline were not constructed, there is little doubt that this financial venture is sound and that funds will be made available.
It is estimated that the cost of pipe Tor tho entire system will amount to0 million, which represents about liO percent of the estimated maximum Investment in the pipeline. The costlnch pipe Is estimated to be0 per ton, and the costnchnch
See IV,elow, and Tableelow.
pipe ie estimated to50 per ton,he cost of UO-inch pipe is estimated to be0 per ton. The total pipe required and the estimated cost thereof, by section, are shown in Table
D. Availability of Pipe
The procurement of pipeajor problem because there is not sufficient production capacity within the Bloc to provide the amount needed for this pipeline and at the same time to provide all that is needed for other projects such as gasline construction in the USSR. None of the Bloc countries hasinch pipe in the:past. Inowever, the firstnch pipe mill in the'^USSR began operatingimited basis. In an effort-to solve the problem ofof pipe of all dimensions, the USSR has contracted vith Italy, Japan, Sweden, and West Germany. ,ermanyonsinch pipe to the'USSR,ons^of which were deliveredj/ Another orderons has been placed with West Germany for shipmentwedenons of athe remainder of which is scheduled for shipment Italyirm orderonsInch pipe-that is scheduled for delivery to the USSR1 theons of pipe of lo^inctr diameter and larger. East Germany alone is capable of0 tonsInch pipe per year, which represents about two-fifths of the requirement for theof pipeline from Plock to the East German refinery at Schwedt. Poland is known to beinch pipe from the Phoenlx-Rheinrohr Company of West Germany. The Czechoslovak section of the pipeline has been completed, and although Czechoslovakia is capable of producing both welded and seamless large-diameter pipe, significant quantities have been purchased from West Germany. Hungary also ls importing pipeinchinch diameter from West Germany. There is no evidence that the procurement of pumping equipment willignificant problem in this construction project.
III. Probable Effects of the Pipeline on Other Modes of Transportation A. General
The net effect of the movement of crude oil by pipeline on other modes of transportation is not entirely clear. On the one hand, theof crude oil from the USSR to the four Satellites by any mode of
* Japan has quoted therice5 per toninch pipe0 per toninch* ollows on
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T 1 1
fi'S'l
Is*1 f
!
IH? SSI p| III II |
LUil I!
transportation other than pipeline probably will cease entirelyn completion of the pipeline, and will not be required5 tho pipeline will bo capable of delivering at loastillion tons of crude oil annually, and the planned export of Soviet crude oil5 to these countries by pipeline is only v, million tons. Therefore, the USSR will feel the effects immediately on completion of the line ln diminished demands on railroad and sea tranaport for the movement of crude oil to the European Satellites.
Demands on the inland transport system of the Satellites will increase. Although the long haul of crude oil by rail from the Soviet-Satellite borders and from seaports vill be eliminated, the growingof the Satellites on petroleumource of energy willon Increase in demand for the transportation of refined petroleum products.
illion tons of crude oil were exported by the USSR to the four Satellites participating in the pipeline project. illion tons were transported by sea to East Germany and Poland through the Bosporus, aboutmillion tons were moved by inland waterway to Czechoslovakia and Hungary via the Danube River, andillion tons were carried by railroad from the USSR. The balance ofillion tons) was actually shipped from Austria to thounder the terms of the Soviet-Austrian reparations agreement.
B. Sea Transport
Although tho cost per ton-kilometer by pipeline transport io about twice the cost by sea transport, the circuitousncos of tbe Black Sea route plus the sizable overland haul at both ends makes it probable that the maritime haul of crude oil will be discontinued on completion of3 and that it will not be required to satisfy the plannedfor crude oil The estimated cost by pipeline from Kuybyshev to Plock willer ton compared with on expenditure5 per tonombination of rail-sea-rail transport.* Theof this sea carriage vill release Bloc tankers, thereby Improving the competitive position of the Bloc in the sale and delivery of Soviet crude oil and other potroleun products to other markets.**
The movement of petroleum by sea to East Germany and Poland also requires on overland routing from tbe ports because present and planned
omparison of expenditures for various modes of transportation, sec Tableelow.
** Nino tankers0 deadweight tons each in continuous operation would be required toillion tona of crude oil from Odessa to East Oerman or Polioh ports.
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locations of refineries are inland. Thus availability of the pipelines also would relieve tho railroad systems of the crude oil trafficvith the seaborne movement.
Water Transport
The movement of crude oil from the USSR by Inland water transport probably will cease, at leasts the capacity of thethat will servo Czechoslovakia and Hungary will be adequate tothe imports planned- Moreover, the coat of transporting crude oilombination of railroad and inland water services from Kuybyshev to the refineries in Czechoslovakia and Hungary exceeds the cost of pipeline transportonsiderable margin (about five tonother reason for avoiding the use of inland water transport is the fact that it isependable mode of transportation if an even flow of crude oil le required. Navigation on the Danube River is interrupted by ice about Uo days annually, usually during January and February, and by low-water conditions during the late summer and fall.
On completion of the pipeline. Bloc river tank barges can befor use in transporting Soviet crude oil, and petroleum products ac well, to Austria and West Germany, thus improving the competitive position of the USSR in the sale and delivery of petroleum to the Western European market.
Transport'
The effect of completion of the pipeline on the railroadof all countries participating in the pipeline program will be far more significant than the effect on other modes of transportation. The movement of crude oil by railroad from the USSR to the four Satellites probably will cease entirely, at leastnd tho movement of crude oil by railroad from East German and Polish seaports to thealso probably will cease or certainly will be reduced. Anin the volume of refined products in the Satellites will result in an increased demand for internal distribution on railroad transport services there. Additional tank cars will be required as well as other equipment and facilities.
On completion of the entiro pipeline system the railroads of the USSR will be the first to realize an absolute reduction in demand for services. or example, the Soviet railroadsillion tons of crude oil to the four Satellites, and the Soviet railroadsa minimumillion ton-kilometers (tkm) in delivering crude
oil to the European Satellite borders-for onward transportation by In addition,.million tons were delivered to Black Sea portstransportation by sea. The railroad distance from Kuybyshevism, resultingillion ton-kilometers. this movement, it ie estimated that theank carsapacity of iiO tons each wasf the pipeline, this demand on the Sovietx;
In addition to crude oil the USSB9ons of petroleum products to. the four Satellites. The exactthat these products moved by railroad within the USSH is not clear but it is probableail haul.was involved, whether the products ere delivered to. seaports or to the Soviet-Satellite borders. Because many of the petroleum refineries in the USSR are located in the areas of production of crude oil, the average length of haul isesulting in delayed turnaround time for tank.cars. It is estimated0 tank cars in addition were,required to .transport* million tons ofproducts.** On completion of the pipeline aod the Satellitethat fthe,,pipeline will;his movement also may cease, as these products..will; .be refined in jther.Satellites.
In summary therefore, putting the pipeline into operation will releasefo tank cars, orercent of the current tank car inventory in the USSR, and thus will reduce the shortage of tank
USSR* Kiesoe ueed lor eternal distribution in the USSR or for delivery to seaports, thus improving the ability of the USSR to deliver its exportable surplus to the other world markets.
SSRexport at leastillion tons of
crude oil to the Satellites. To move that tonnage by rail to the Soviet-Satellite borders.or to the Black-Sea-ports would require more0 tank cars or aboutercent of the planned inventory of Soviet tank cars The investment, required to build these tank cars for use in Satellite traffic alone would amount to1 million rubles'* (Slolrercent of. the estimated maximum cost ofthe Soviet section of the pipeline as outlined Intt
.b
* Although other Black Sea ports may have been used, the difference in rail distance would be negligible. ** See the methodology, Appendix A.
r^The averaSeof haul for petroleum products in the USSRo7 km.
* tnrtJtBtiEated tQattank cars will be required in the USSR inJ-W, provided that all planned pipeline construction is completed.
Estimated to boubles per tank.bove.
- ll* -
3- European Satellites
The effect of the pipeline on the railroad system' in the Satellites will be somewhat different from that in the USSB. It Is probable that the planned import ofillion tons from the USSR5 will move entirely by pipeline, thereby eliminating the longhaul from tlie Soviet-Satellite borders. Although the refineries at which the pipelines will terminate willapacity of onlyillion tonst is believed thatillion tons above new refinery capacity will be distributed from the pipeline terminals to other refineries. Both Czechoslovakia and Hungary will haverefinery capacity to absorb the additional tonnage. It is probable, therefore, that pipeline deliveries5 will be as shown in Table 6.
Table 6
Estimated Deliveries of Crude Oil by Pipeline from the USSR to Poland, East Germany, Czechoslovakia, and Hungary
Million Metric Tons
Recipient Country
Germany
Slovakia
Transportation of this amount Of crude oil by railroad from the Soviet-Satellite borders to the Satellite refineries would requireCO railroad tank cars distributed as follows: ; EastCO;; and. At an estimated cost0 rubles per tankhis wouldan investment of about STY million, or aboutercent of the cost of constructing the Satellite sections of the pipeline.
The Satellite plans for the import, of crude oi] beyondnot available. Refinery capacity in tuese countries
ever, probably will arounT. to aboutillion tons annually.* Domestic
New refineries at pipeline terminals plus the capacity of existing
productionssuming that the goals5 are maintained, coupled with pipeline deliveries of up toillion tons, will amountI* million tons, or almostercent of refinery capacity.
E. European Satellite Transportation Systemhole
The pipeline will reduce the demands on the over-allsystems of each of the four Satellites for the transportation of crude oil Nevertheless, the large increase in imports of crude oil, coupled with increased domestic production, will generate anIn demands on the transportation system for the movement ofproducts. Itis not feasible to estimate the demands that may be levied on each mode* of transportation, but it is reasonable to concludeailroad haul will be requiredajor portion of the tonnage. It is not possible, either, to assess accurately the requirements for freight cars, locomotives, personnel, and route space, because the length of haul will be reduced and the distribution pattern will change. the type of freight cars utilised most advantageously for theof refined products varies, to some degree, from the type required for crude oil. -It is even possible that the amount of coal used bywill be reduced as petroleum Is substituted for coaluel for transportation, and this substitution itself wouldeduction in tonnage to be carried because the calorific value of petroleum is much higher than that of coal. This situation has prevailedumber of Western European countrieshen coal tonnage has dropped as petroleum tonnage increased.
The increase in demand for the transportation of petroleum alone5 amounts to about Uh percent above the demandeasured in terms of tons carried. The change will vary in each country. Aanalysis of demand ls shown in
"N* Comparative Freight Rates for Transportation of Crude Oil, by Mode of Transportation
A. Pipeline
A comparison of rates for transportation of crude oil by pipeline with the rates and charges by any other mode of transportationifferential of betweenndercent.
In tho Soviet Bloc the ministries controlling the petroleumoperate the petroleum pipeline systemrivate carrier and notommon carrier offering service to shippers generally. For this reason, no rates, as opposed to costs, have ever been announced, and no
* ollows on
-
mi
IS
Hi
*
MM
1 ffii
roteo are believed to exist. Therefore, the only measure of price paid for transportation of crude oil by pipeline is the cost. The USSR has announced that the cost of transporting crude oil through the pipeline now under construction to the Satellites will be0opek perents).*
B. Railroad
fi!lt ra"crude oil tranGported by railroad varies with the length of haul On the basis of current freight tariffs in the Soviet
bo transported in the USSR and ia each of the Satellites, railroad rates per ton-kilometer and por ton are computed as follows:
Distance (Kilometers)
' j'" hop It50
Kopeks per3O 3per ton
An additional chargeubles per ton is levied for transloading crude oil at the Soviet border from Soviet wide-gauge cars tostandard-gauge cars.*
C Inland -
v 1. v. /Uth?U^ adequate, direct inland waterway connections between Kuybyshev and the Satellites arc nonexistent, crude oil could befrom Kuybyshev by rail.to the nearest Danube River port at Galati Rumania, for onward transportation by river barge to Hungary and Czecho-' taaoo is so great, however,ombination of rail and inland water rates exceeds the through rail rate."*
D. Sea
urrent freight raterude oil moving by sea from Odessa to Boat German or Polish ports on the Baltic is aboutubles) per ton, and to this rate on additional rate oust be added for inland
Pipeline revenue In the US9 vas at the rate1 centton-oile 1 cent per metric
See Tableelow.
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Jin*-
transport from Kuybyshev to seaport and from seaport to destination. This combination of rail-sea-rail rates is so prohibitive that when the pipeline system ls In operation, exports of Kuybyshev crude oil from Black Sea ports probably will be discontinued. Such an export movement probably will not take place until constructionipeline from Kuybyshevlack Sea port is accomplished,
E. All Modes of Transportation
A comparison of rates and charges by all modes of transportation is outlined in An examination of the table reveals thatof crude oil by pipeline from Kuybyshev to the Satellites will result in Bloc-wide savings in transportation expenditures ofoercent compared with any other mode of transportation. The economies within tbe Satellites alone are of such magnitude that the Satellites will be able to recover their investmentemarkably short period of time.
The rate at which the USSR will be able to recover its investment in pipeline construction is not clear. The country normally sells crude oil to the Satellites at prices. the Soviet border anda substantial share of the transportation costs of this movement. Expenditures for pipeline transport from Kuybyshev to the Satellitewill beheaper per ton than rail transport. These substantial savings in transportation costs resulting from the use of pipeline transport could be passed along to the Satellites in the form of lower prices for Soviet crude oil. It is more likely, however, that the USSR will retain most if not all of these savings in order tothe rate at which the substantial Soviet investment In the pipeline system will be recovered.
V. Economic and Military Strategic Significance of the Pipeline
There is no evidence that the Satellite portion of the pipelineis intended for any purpose other than the supply of crude oil to the Satellites. The capacity of the line, however, will amount to aboutillion tons when all pumping facilities are installed. This figureillion tons higher than the planned imports of crude oil by pipeline by the Satellites It is entirely possible that full capacity could be achieved on completion of the pipelinehusapability to use the pipeline for transportationart of the crude oil snipped to Western European countries. owever, this excess capacity will be reduced or even eliminated, as new refineries at pipeline terminals in the Satellites will requireillion tons,that refinery construction goals are met.**
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It is doubtful that the use of this pipeline system forajor consideration in deciding to undertake the project. The system was designed exclusively for the transportation of crude oil, and the movement of crude oil cannot bc alternated readily with theof light petroleum products such as gasoline or diesel fuel. to alter the system to carry petroleum products Instead of crude oil after the system is in use wouldime-consuming cleansing effort to avoid adulteration and an increase in storage facilities. Pumping equipment also probably would have to be changed, as the pumps usedrude oil pipeline are not suitable for light products. The pipeline system, however, will contribute to an increase in the supply of fuels in Eastern Europe by caking crude oil availableinimum expenditure for transportation. Moreover, the pipeline system willthe intensively'used railroad systems of the long haul of crude oil and petroleum products from the USSR, thereby improving theirto carry other economic and strategic materials.
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APPSfiUlX A
METHOEOLOGY
1. Estimating the Cout of Pipeline Construction
The methodology employed In estimating the cost of pipelineis given in some detail In the text. The estimates of the cost In the US arc based on reports ia various engineering publications thatan average0 per mile. Estimates of the cost ofIn the USSR and the Satellites are based on the cost prevailing ln the USSl6 for pipelinesinch, andincn diameters. Although the cost of pipe has Increasedhe actual cost of conotruction has decreased with the advent of mechanized trenchingimproved pipe welding and wrapping devices, and Improved technology gained through experience. Moreover,eport to the Inland Transport Committee of the Economic Commission for Europe of thehe USSR announced the allocationillion now rubles for theofkm of pipeline, including the crude oil pipeline to the Satellites. This amount reflects an average ofubles per kilometer, or0 per kilometer." Tbe cost of constructing terminal and Intermediate storage tanks iu not included ln these estimates, because storage tanks would be required rcgurdless of the mode ofused to tranopdrt crude oil.
7, Estimating Expenditures for Transportation of Petroleum
Expenditures for rail transport are based on current freight rates applicable ln the USSH and publiohed in Spravochnik po tarlfam rheleino-dorozhnogo tmr.sporta (Handbook of Railroad FreightExpenditures for sea transport ore based on current freight rates between the Black Sea and Polish Baltic seaports published In various shipping publications, including the Weekly published by the Maritime Researchev. Current coats, ao opposed to rates, for the transportatior. of crude oil ln tank cars ln the four Satellites are not available. Tbe average cost for all commoditiesfl In the USSH, however,3 kopeks per ton-kilometer. The cost of transporting crude oil in tank cars is considerably higher than the average, for empty car movementercent of the loaded haul. It is believed, therefore, that the actual rail cost for transportation of petroleum ln railroad cars Isopeks per ton-kilometer and Is very close to the rail rate.
* Data as given in the source are in new rubles and were converted to ola ruoles at the rate ofld rublesew ruble.
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3.. Estimating Tank Car Requirements
Fur the purposes of this report, minimum tank car requirements are estimated on the basis of the following factors to determine turnaround time and annual carrying capacity: (a) the length of haul is multiplied by two because tank cars are loaded in one direction only; (b) thedaily movementank car is estimated toc) the time required for loading, unloading, switching, and billing is estimated to5 days; and (d) the average load per car is estimated to be Uo tons (USSR) andons (European Satellites).
Example 1* USSR
Kuybyshev to Brest and return:
m dividedloading, unloading, and
switchingdays
Turnarounddays
ays dividedays yields the number of times
each car is used pertimes
Multiplied by tons per tons
Tons per car pertons
Therefore, the total annual tonnage dividedO would equal the number of tank cars requirod. This number would represent the operating park, orercent of the total, as it is estimated thatercent of the tank car inventory is undergoing maintenance and repair at all times.
Example 2: Satellites
The same methodology used ins used in Exampletons per loaded car and according to the round-trip distances
Kllorreters
to Plock and
to Schwedt and
to Bratislava and
to SzuzhalO-Tibatta
and
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APPEND Dt B
GAPS IH INTELLIGENCE
Accurate Information on tlie cost of constructionO-inchin the USSR ln not available, because the pipeline construction project now underway ia the first instance In which constructionipeline of that diameter has been attempted in the USSR. For the same reason, accurate Information on the operating cost of the pipeline is not available. Periodic reports on the rate of progress lnof all sections of the pipeline now underway arc urgently required In order to estimate completion dates.
APPKKDD- C
SOURCE REFERENCES
Evaluations, following the classification entry and designatedave the following significance:
Source of Information
- Documentary
Confirmed by other sources
-
reliable
Probably true
-
reliable .
Possibly true
-
reliable
Doubtful
-
usually reliable
Probably raise
-
reliable .
Cannot be Judged
-
Judged
"Documentary" refers to original documents of foreign governments and organizations; copies or translations of such documentstaff officer; or information extracted from such documentstaffall of which may carry the field evaluation "Documentary."
Evaluations not otherwise designated are those appearing on the cited document; those designatedre by the author of this report. Ko "RR" evaluation is given when the author agrees with the evaluation on the cited document.
CIA/RR EMU, The Fuels and Power Industries of the
European Satellites: Significant Developrr.orr.L'0 and" Prospects0 iT.
JPRS. 2. Eval. RR 3-
Petroleum Press Service.. U. Eval. RR 3.
3IS, Dully Report (USSR and East
p. HH k. OFF USE. Eval.- Weekly Bulletin of the Hungarian Hews Agency, Mil, vol I, no 1,
1 U. Eval. RR. CIA. CIA/RRonstruction Underway on USSR-Satellite
Oil Pipeline.ar 6l, p. 5- cl Neftyanoye khozyaystvo.. U. Eval. Doc.
0
N.N. Ekonomikaekhnicheskiy progress
(Economics of Industry and Technical. UQ. U. Eval. Doc.
CIA/RR ERransportation Growth and Trends In the
, Feb 6l. S.
CIA. CIA/RRbove).
Kekrasov, op_.above).
CIA. FDD Summaryxternal Economic Relations of Bloc
7 QiV USE. Eval. RR ** -lU. Ibid.
Ibid.
State, Tokyo. 3 OFF USE. Eval. RR 2.
-
19.
, Jval, -R
Services Petroleum Board. POL Conversicn Factors ond
Capacity Tables, U. Eval. RR 2.
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Original document.
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