Russian Petroleum Refineries to Be Made More Competitive through Improved Quality and Lower Costs

20 june 2018 | Rossiyskaya Gazeta

Over the past 3 years our country has seen a slight decline in primary petroleum refining having to do with the large scale industry modernization program, writes the Rossiyskaya Gazeta.

Victoria Gimadi
Victoria Gimadi
Department for Fuel and Energy Sector

Meanwhile, planned improvements in the quality of petroleum refining, sanctions on imported equipment as well as changes in the tax and customs regimes remain relevant issues for the industry as well, the publication points out.

"In recent years the Russian petroleum refining sector has made significant progress," Analytical Center expert Victoria Gimadi said in an interview for the Rossiyskaya Gazeta. "First, they've managed to completely satisfy the domestic market demand for gasoline and diesel fuel in the fifth environmental class. Compare that with 2011 when the share of fifth class fuel in the total consumption of automotive gasoline was just 2% and for diesel fuel it was just 17%. Second, our petroleum refineries have managed to increase the depth of petroleum processing. Thus, while in 2011 the depth of petroleum processing at Russian petroleum refineries averaged 70.6%, in 2017 it had gone up to 81%, according to the Federal Statistics Service."

According to the expert, the positive results of the modernization of the industry have to do with the signing in 2011 of the four-party agreements between the main Russian petroleum refining companies, the Federal Antitrust Service, the Federal Technical Supervision Service and the Federal Standards Service. 2011 also saw changes to tax and customs regulations (there have been several more changes since), aimed, primarily, at increasing the depth of petroleum processing in Russia. And somewhat earlier, requirements were introduced to move the domestic market to high environmental class fuels in the future.

"The depth of petroleum processing differs in different countries," Ms. Gimadi said. "Thus, according to the International Energy Agency, in the US it exceeded 97% as far back as 2015, in Canada it was close to 95%, in the UK and Germany it was about 92% and in Italy it was about 90%. The draft energy strategy of Russia until 2035 envisions petroleum processing depth at a comparable level of 90–91%, which should be achieved by the second stage of the implementation of the strategy, i.e. between 2021 and 2035.

In 2011–2017 companies did a lot of work to modernize their petroleum refineries, however, in recent years they've been lagging behind their own modernization schedules, Ms. Gimadi noted. The main problems and constraints that she cited include the deteriorating macro-economic situation (first of all the falling crude oil prices) and the conditions for raising financing from foreign investors. According to the expert, the "tax maneuver" adjustments in the petroleum industry also led to changes in the conditions that modernization projects have to be implemented under.

Source: Rossiyskaya Gazeta

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