What at expects the rail transportation of oilproducts and destiny of terminals

1. 50 | Baltic Transport Journal | 3/2013
Overland
Photo:WikimediaCommons
‚ FTS Ordinance No. 398 is a very co-
pious document and so complex that
many logistics professionals and trans-
port experts do not entirely understand,
what precisely is taking place. Working
at MST, you have an opportunity to see
the whole picture. Would you explain
– briefly and in an accessible manner –
what is going on and what will happen
to the cost of transportation?
What happened, had been maturing for
a long time in the railway tariff system, as
well as throughout the Russian Railways
(RZD) and within the economic system.
Public subsidies to this branch have shrunk
so much that RZD are unable to develop the
infrastructure needed to accommodate the
growing cargo volumes. A critical moment
arrived, when the issue of targeted develop-
ments had to be solved.
Regulation 398 brings in a revolutionary
standard – namely, the permission to part-
ner with private companies in order to in-
crease the throughput capacity of railway
directions and lines. This is a major step
New stage of the railway carriage of oil
On 18th
December, 2012, the Federal Tariff Service issued Ordinance N 398.t/3 g. “On Adoption of the Rules and
Conditions of Application (Establishment, Amendment) of theTariff Level on the Railway CargoTransport Services
within Price Brackets (the maximum and minimum levels)”. The document may, and surely will, have a serious im-
pact on the economy of many industries. Although rare specialists, including those to be affected by the changes
very soon, understand this. This is the subject of our interview with Sofya Katkova, project manager at Morstroy-
technology,anengineeringcompanyspecializinginresearchanddesignprojectsinthefieldofmaritimetransport.
Interview with Sofya Katkova, project manager at Morstroytechnology
forward. In other words, the document sets
the rules for investing in individual facili-
ties of the railway infrastructure, access to
which had been restricted to investors and
freight shippers. Furthermore, the Regula-
tion contains some other progressive ele-
ments: it stimulates modernization of the
rolling stock and implementation of mod-
ern technologies and it repeals the differen-
tiation of the empty mileage by cargo class-
es. Yet, it will produce some adverse effects,
too. Firstly: all progressive developments
will be affected at the expense of shippers’,
mainly – of those shipping expensive cargo
– oil processing and petrochemical industry
products, in particular. Prices will rise on
popular directions leading to seaports, used
by exporters (although, if roads’ throughput
capacities will be increased as a result, the
effect can be considered super-positive).
Photo:Morstroytechnology
Photo:VosslohCogiferSA

2. Overland
3/2013 | Baltic Transport Journal | 51
Fig. 1. The share of oil cargo in the Russian Railways’ total revenue from cargo transport
Source: Institute of Transport Economics and Development
Domestic market prices of oil products will
grow owing to the almost formulary nature
of the fuel component in the railway tariff
price. And last, but not least, the most un-
pleasant aspect: railway transportation pric-
es will be very unstable and will have to be
forecasted and monitored all the time.
No, no such explicit statement can be made
here. For most cargo types – this simply is
not true. But in the case of the expensive
cargo sector – and the oil segment clearly
belongs to this category – the right to raise
transport tariffs so as to follow the changes
in market prices has been given. Admit-
For the railways, a new era is approaching: a
shift from the monopolistic model to a mar-
ket one will most probably take place upon
accession to the WTO. In the new period, the
market will burst in so forcefully that the ef-
fects are very hard to foresee. There are many
niches here “open” to European companies
to break into the market of railway services.
‚ What scenarios can be forecasted for
the oil extraction and oil processing
industries?
Until the current reform, the railway tariff
was a sort of constant, a baseline and sta-
ble value which provided a basis for all the
interconnected systems setting up their
pricelists. For example, river companies
took a competitor railway connection as
a basis, while sea terminals “pulled” their
prices up to the level of transport losses on
the connection towards their competitor
terminal. Hence, now, when what used to
be firm and stable, has gained high volatil-
ity, exporters will be facing more nervous
circumstances in the transport sector – not
only in its railway segment, but in the mari-
time and the river one as well.
‚ So, what should cargo owners, inves-
tors, and company boards do? Regard-
less of how unpredictable the world will
be, decisions affecting the future need to
be made today.
I will revert to the tariff system and Ordi-
nance 398. It should be one of the important
goals of the Russian Railways’ tariff to make
the tariffs more transparent and clear to their
customers by reducing the number of coeffi-
cients and adjustments, simplifying tariff cal-
culators. But at present we have encountered
a new turn complicating these calculations.
Now, all the inputs need to be monitored for
their compliance with the Ordinance provi-
sions and for validity. And, what is most im-
portant, forecasts covering a period of one
month at least are required. This should be a
principle, so as to make the forecast reliable.
The problem here is that each industry can
see its own yard only, while nobody is able to
view the big picture or to make a projection
of the changes onto all of the railway carriage
– except for the Russian Railways, but even
this is not the case. In 2012, Morstroytech-
nology’s experience in the freight flow analy-
sis included projects for various customers
from the oil sector and enabled us to develop
a 2012 logistics price model for oil cargo ex-
port, so we are ready for our part. Are you?
KseniaChruslova
tedly, the regulations impose many restric-
tions, including a process of corrections, but
the essence remains unchanged: any price
jumps on the fuel market will be “reflected”
in the railway tariff for bulk liquids. Con-
sequently, some portion of the margin will
escape to the Russian Railways’ system.
‚ What other effects on the economy can
be foreseen?
Besides the “stratification” by cargo cate-
gories, territorial and directional differen-
tiation is envisaged. This means that the
principle of a “common, average, network
tariff” for the railway will gradually die
out. I will put this more clearly: if previ-
ously it was unimportant where a tonne
would be transported within the railway
system, now this “stratification” will be
added too: for example, on the Sverdlovs-
kaya or Kemerovskaya railway line tariffs
will be higher. If cargo is bound for the
Far East, more has to be paid. These can
be referred to as extra charges: an extra
charge for a popular direction, or for an
option to carry the cargo away from the
shipping railway. To all this, the need to
follow carefully the fuel component of the
railway tariff price should be added.
‚ You have already mentioned the WTO.
Clearly, although the process of prepara-
tions to Russia’s accession to the organiza-
tionhastaken18years,alotofunexpected
is waiting ahead. What is going to happen
to the Russian Railways?
‚ Talking about costly cargo, you men-
tioned oil products. Why?
The reason behind the State’s concern
for the oil industry is explicable. Prior
to joining the WTO, tariffs for all direc-
tions had to be equalized. This problem
has remained unsolved for oil cargoes,
while namely this group is one of the main
sources of income, its volume accounts
for no more than one fourth of total ship-
ments, however. Therefore, it is necessary
to increase the overall tariff level, so as
not to lose the financial balance. The Or-
dinance provides for a method of binding
to the price of the cargo being transported
by railway, whereas this rule entirely con-
tradicts the basic principle of a robust
transport system, where tariffs should be
built upon costs with the value added by
the service quality. In Europe, the differ-
ence between various tariff classes ranges
from 10 to 30%, while our spread was even
greater before and now the gap is going to
be really huge.
The price for transporting a tonne of any
cargo has always been higher than that of
carrying the same volume of coal. But in-
stead of simplifying the tariff system and
shifting to a system of greater “proximity”
between tariffs for various cargo classes, we
have deepened both the crisis and the tariff
gaps between cargo classes.
‚ Does this mean that what is nicely
termed as “deregulation” will lead to
nothing more than greater losses?