The refinery between Germany and an oil embargo

For decades, crude oil piped from Russia has flowed into a giant refinery in Schwedt industrial city on the banks of the River Oder in Germany, providing jobs for thousands of workers and a reliable source of gasoline, jet fuel and heating oil for Berlin residents.

Now, while the member states of the European Union have struggled to agree on the terms of an oil embargo to punish Moscow for its invasion of Ukraine, the Schwedt refinery has become the main obstacle in Germany’s effort to end its dependence on Russian oil. The prospect has sounded an alarm among the refinery’s 1,200 employees.

Germany relies on Russia for about a third of its oil, and Robert Habeck, minister of economy and vice chancellor, spent weeks preparing for an embargo, flying from the UAE to Washington to Warsaw to align alternative sources of crude.

“The last third is the problem,” said Mr. Habeck in a video aimed at explaining the situation to the Germans. And most of that Russian oil comes from the Schwedt refinery.

The refinery is a looming symbol of how deeply Germany’s oil and gas needs are tied to its giant energy exporter to the east. The PCK refinery – the name is a nod to its East German roots as the state-owned “Petrolchemies Kombinat” or Petrochemical Combine – is owned by Rosneft, the Russian state oil company. It is connected to the Soviet-era Druzhba pipeline, one of the longest in the world, which carries oil from Siberian wells to Western Europe.

And it remains an essential part of Germany’s energy needs, producing fuels for Berlin, Germany’s largest city, and neighboring areas, including parts of Poland. The supply of enough oil to replace the 12 million tons of crude oil processed each year in Schwedt – through the German and Polish ports to the north – is only one piece of the puzzle, because Rosneft has told German officials that he has no interest. to operate the refinery using non-Russian oil.

To address this issue, the German parliament passed legislation last week that would make it easier for the government to seize essential foreign-owned infrastructure to prevent a national emergency. Should the oil embargo pass, German officials said the new law would allow Berlin to ensure an adequate supply of petroleum products until another company is found to acquire Rosneft’s stake.

shell, Europe’s largest energy company, which holds a 37.5% stake in PCK, recently said it will support the refinery, “even at the cost of economic losses to maintain supplies to the region.” Last year, Shell tried to sell its stake in the refinery and Rosneft moved to acquire it, but the German Ministry of Economy, which evaluates the political and strategic aspects of foreign investment, has yet to approve it.

Another energy company, Alcmene, part of the British energy holding Liwathon Group, has expressed interest in investing in Schwedt. “We would be able to ensure security of supply and full use of the PCK refinery through German ports” without government subsidies, Alcmene said in an e-mailed statement.

Chancellor Olaf Scholz made it clear that he was aware of the concerns surrounding the refinery and made it a priority to ensure its future.

“We are looking very closely at how this can actually work,” he said at a recent meeting of his party in the state of Brandenburg. “We will also make sure that the employees are not left alone.”

Fears that layoffs might be around the corner drew hundreds of workers, many of them dressed in the official CPK fluorescent orange and forest green colors, to the company cafeteria earlier this month for a town hall meeting with Mr. Habeck.

Like other regions of former East Germany, Schwedt suffered widespread job losses following the collapse of communism. Memories of 25 percent unemployment still haunt the region.

Furthermore, the refinery is not only a source of oil and income, it is also the hub of the city’s identity. Flattened by the Soviet Union at the end of World War II, the arrival of the pipeline – its name, Druzhba, means friendship in Russian – and the refinery in the late 1960s attracted thousands of workers and their families, attracted to safe jobs. PCK’s slogan is: “We move Berlin and Brandenburg!”

Today, about one-tenth of the city’s 30,000 inhabitants have secure union jobs at the refinery and support industries. Many workers used the meeting with Mr. Habeck to question the government’s approach.

“Why should we take a business partner who has been reliable and always available for decades and slap them with an embargo?” said a man who identified himself as having worked at the refinery for 27 years.

“My wish would actually be to keep the Druzhba pipeline completely out of the embargo,” said another employee, who identified herself as the mother of three young children. “There is no alternative that is profitable.”

journalists were asked not to identify the employees who spoke at the event, to protect their privacy.

Mr. Habeck tried to assure the crowd that the refinery would continue to operate. “If everything works as it does on paper,” crude oil from Norway or the Middle East could be shipped from the ports of Rostock and Gdansk, Poland, both of which are connected to the refinery by pipelines.

At the same time, he acknowledged, there were several points in the process where he could run into a hitch.

The PCK plant, like other refineries, is designed to process the particular type of crude oil from Russia. Crude oil from other countries would have to be blended with oil from reserve tanks on Germany’s northwest coast to create a suitable blend.

Bringing that oil reserve to the Rostock pipeline would take a seven-day journey by sea, because no pipeline crosses the former border that divided East and West Germany, and the country’s leading rail freight operator has almost no oil cars.

Another potential complication: The Polish government refuses to work with Russian entities and has told German officials that as long as Rosneft has an interest in the refinery, no oil will come from Gdansk.

“We can’t be completely sure what we’re doing,” Mr. Habeck told refinery employees. “But at least it has been discussed and pondered thoroughly.”

Ultimately, Mr. Habeck and local officials would like to see the refinery move away from fossil fuels and focus on renewable energy processing. In recent years, PCK has invested in the development of synthetic fuels with a focus on hydrogen. Verbio, a company that produces ethanol from local sources, operated on the refinery site, injecting bioenergy into the city’s heating system.

Officials in Berlin stressed the economic attractiveness of the surrounding region, pointing to the new completion Tesla Assembly Plant and Intel’s announcement of a $ 19 billion chip manufacturing facility. Both companies have been attracted to an abundance of renewable energy, said Carsten Schneider, Chancellor Scholz’s liaison for the east Germany, who also spoke to Schwedt residents.

“I assured them that the German government would not be limited to them, but would make an effort, both for a short-term solution to protect oil somewhere else, and for long-term abandonment towards restructuring of production. of regenerative energy, “he said.

City Mayor Annekathrin Hoppe said she would like to create a campus for start-ups, incubators and other energy innovators near the refinery to promote the transition to green energy production. But you, you said, would require “sums of millions or billions”.

Despite all the attention that Berlin politicians have poured into his city, he said he has not yet seen a timeline or any concrete guarantee that people would be able to keep their jobs or any pledges of financial assistance.

“It was a good start,” he said of the viewing corridor over the past few weeks. “But it was just a start.”