Czech Pipeline Operator Mero Buys 5% Stake in TAL Crude Oil Pipeline

PRAGUE--The Czech government-owned crude oil pipeline operator Mero CR AS said Tuesday it has agreed to buy a 5% stake in Transalpine Pipeline, or TAL, for an undisclosed price from the German unit of Royal Dutch Shell, as the former Communist nation seeks to boost its energy security by lessening dependence on Russian crude oil.

TAL links Italy's Adriatic coast with Austria and Germany. The pipeline is mostly used for the transport of non-Russian crude brought by tankers to the Italian port of Trieste.

"The stake in the TAL pipeline is key for our energy security and policies of diversifying our crude supplies," said Martin Kuba, the Czech minister for industry and trade, who oversees the government's shareholding in Mero CR.

Fears of shut downs in Russian crude oil supplies emerged in October when Russia diverted crude shipments from the Druzhba/Friendship pipeline to other directions. As a result Czech oil refiners, operated by Poland's PKN Orlen SA (PKN.WA), had to rely solely on shipment from other sources.

"The situation which occurred in October was a warning sign," Mr. Kuba said. "However, our long-term policy priority lies in diversification by using both Druzhba and TAL crude oil sources."

In southern Germany the TAL pipeline hooks the Ingolstadt-Kralupy-Litvinov, or IKL, pipeline, already owned by Mero CR, which brings crude oil to Czech refineries north of the German border.

Although Mero CR already transports non-Russian oil into the Czech Republic, as a TAL shareholder it will be able to boost Czech-bound oil volumes in this system by gaining preferential access to TAL's capacity.

"If there was a complete disruption of crude oil flows in the Druzhba pipeline, we can fully cover demands of Czech refiners thanks to our position of a shareholder in the TAL pipeline," Libor Lukasek, director for strategic development at Mero CR, said.

Mero CR bought TAL shares from Shell Deutschland Oil GmbH, a unit of Royal Dutch Shell.

Other TAL shareholders include BP Plc (BP), ExxonMobil Corp. (XOM), ConocoPhillips (COP), OMV AG (OMV.VI), Total SA (TOT) and Italy's Eni SpA (E).

"Shell and Mero CR agreed not to disclose the price of the transaction given the sensitivity of pipeline pricing issues," Mr. Lukasek said.

Write to Leos Rousek at [e-mail]

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