Russia will limit oil products shipments by river in 2008 after a fuel oil spill from a river barge in the Kerch Strait this month caused damage estimated at $267 million, officials said on Wednesday. Shipping executives said they suspected the limits on river barges over 25 years old would ruin the industry as it would cut flows of oil products by rivers by 70-80 percent from the current 5 million tons. "The fleet must be young. We will subject ship owners to such conditions that it will become unprofitable to use barges older than 25 years," Alexander Davidenko, head of RosRechMorFlot, the river navigation agency, told Reuters.

The statement followed an earlier comment from an official from the Transport Ministry, who said the agency, which reports to the ministry, is working on such bans. "We will (also) most likely ban floating storage operations," said the official, who requested anonymity. Russian refiners use river barges and floating storage facilities to export around 3 million tons of fuel oil from ports on the Baltic Sea and another 2 million tons of refined products towards the Mediterranean market.

Products arrive in small barges from refineries, belonging to oil majors Rosneft, LUKOIL, TNK-BP and the independent Ufa refiners. They are stored in bigger sea floating storage vessels and are then reloaded into tankers for re-export. Operations stop in the winter months, when rivers freeze, and peak in summer months as they are usually cheaper than rail shipments of refined products.

ECOLOGICAL DAMAGE
A storm broke a tanker and sank at least four freighters earlier in November while crippling other vessels in the narrow Kerch Straight between the Black Sea and the Sea of Azov. The tanker wreck caused a fuel oil spill, which the Russian environment watchdog said has killed dolphins and thousands of birds and fish after polluting a 50-km (30-mile) stretch of Black Sea coastline.

Russian officials have said the storm had produced the worst mass shipwreck in modern Russian history. They ordered a safety review after reports some of the ships ignored a storm warning and put to sea, and that some were not seaworthy. On Wednesday, the resources ministry it estimated the ecological damage from the incident at 6.5 billion rubles ($267 million).

The source in the transport ministry said RosRechMorFlot had already ordered the closure of the river navigation season in the south of Russia on November 22, 10 days earlier than planned. It also banned river barges older than 25 years from entering the open sea.

Pyotr Razumov, general director of Vision Float, one of the biggest river shippers in the north, said he was aware of the discussion to ban barges over 25 years old, which he said represented 70-80 percent of Russia's overall river fleet. "There is a lot of talk about it. We are afraid of hasty restrictions as it always happens after negative developments," he told Reuters. "If we ban floating storage operations, the river fleet will not be able to move at all," he said. A source with a major trader said the ban would be somehow bypassed next year: "It is not only against the interests of major oil firms. You have to keep in mind that if you do it, some 10,000 people in the industry will lose their jobs."

(By Denis Pinchuk and Dmitry Zhdannikov, Reuters, 21/11/2007)