Supporting mini oil refineries at lagre should not become a political priority

31 august 2015 | Rossiyskaya Gazeta

Experts note that mini oil refineries and mini natural gas processing plants are an important element of the oil industry. Small businesses can become full fledged participants in the oil refining business and perform the important function of supplying fuel to local markets, but serious investments are needed for that to happen as well as the will on the part of management of small companies to abide by law and meet the same quality standards that big oil companies are required to follow.

Alexander Kurdin
Alexander Kurdin
Department for Fuel and Energy Sector

Rossiyskaya Gazeta cites the Рead of the Department for Strategic Studies in the Energy of the Analytical Center Alexander Kurdin, who considers that the role of small oil refineries in Russia should be to supply fuel to specific regions or companies which, for logistical reasons, cannot be efficiently supplied with fuel by large refineries, as well as to prevent monopolization of the market of petroleum products in some regions. ‘These functions stem from the siting of major oil refining capacity we have inherited from last century but they are local in nature so the share of small oil in total output in Russia in 2014 was just 3 percent. Efficient oil refinery requires, on the one hand, large production scale but on the other, proximity to consumers to minimize transportation costs. In Russia there are places where the two goals are impossible to achieve at the same time and possibly mini oil refineries can offer a compromise solution here,’ the expert says.

As for small natural gas processing facilities, the expert believes that their main function should be utilization of associated petroleum gas and thus it would make sense to site them close to oil deposits. Seeing as the state is currently actively pursuing a policy of minimizing the burning of associated petroleum gas and major gas processing facilities cannot always be built next to oil deposits, small gas processing plants are being built there.

Supporting mini oil refineries in and of themselves should not, however, become a political priorities, accoeding to Mr. Kurdin. ‘And yet in some areas, first of all in remote areas located a long way from the nearest major oil refinery, regional authorities should consider small refineries as an alternative to other ways to sell their energy resources and should support them as they prove more efficient than other solutions, with such support being offered in the form of land and infrastructure,’ the expert believes. In his opinion, support of mini gas processing plants should focus on promoting development of gas processing as a whole and reducing the burning of associated petroleum gas so oil and natural gas producers can make their own decisions on the scale and manner for gas processing based on the requirements imposed by the state.