Russia’s Oil Refining Industry

An Expert's View about Energy in Russia

Last updated: 13 Mar 2011

Summary

Russia is among the top ten in proven oil reserves, and the largest exporter of oil and natural gas in the world. Inflow from the oil and gas industry accounts for almost a half of Russian federal budget revenues, most of it coming from exports of crude oil and natural gas. Lately, however, a strong emphasis has been made on the necessity to develop the Russian oil and gas refining and petrochemical industry, which should reduce the dependency of Russian economy on world prices on raw oil and gas. The plan is to not only fully employ existent domestic refining capacities, but to gradually build up and upgrade existing refineries and build new ones. In perspective, this strategy should lead to Russian companies focusing on export of processed petroleum products rather than crude oil and gas, and being able to satisfy increasing domestic need in high quality petroleum and petrochemical products.

Thus, Russia remains one of the few regions that continues to look at major investment programs in the downstream sector. A reason for this trend is the relatively small investments made in the sector over the past decades.

One of major incentives for the technological upgrade of Russian refineries is the official ban on the production of low-quality fuels. Recent changes in the Russian legislation require the production of Euro-2 standard petrol be stopped after December 31, 2010. Technical Regulations adopted by the Russian government provide a strict timeline for a gradual ban on Euro-3 and Euro-4 petrol and Euro-2 and Euro-3 fuel oils as well. As a result, most of the Russian oil majors have been actively investing in the upgrade of their refining facilities, which creates new opportunities for US manufacturers of refining technologies and equipment.

Market Data

As of today, Russia counts 30 major oil refineries with a total capacity of 261.6 million tons, and about 80 mini-refineries with a total processing capacity of 11.3 million tons. In 2008, Russian refining industry produced 36 million tons of gasoline, 69 million tons of diesel fuel, and 64 million tons of fuel oil.

Most of Russian oil refineries were built in the two postwar decades: 16 plants, which is more than a half of the active to date in Russia, were commissioned in 1945-1965. Only two refineries with the total capacity of about 3.5 million tons were launched in Russia after the collapse of the Soviet Union. Thus, overall, plants built during the Soviet time are currently recycling about 98% of oil, and until recently, only few of them had gone through significant technological upgrade. It is not surprising therefore, that experts unanimously admit a high wear-out coefficient (60-75%) and technological backwardness of Russian refining industry. Despite certain positive changes that have taken place recently, the quality of the product leaves much to be desired and the depth of oil refining is still extremely low: The average depth of oil processing in Russia does not exceed 70%. In addition, the hydroskimming capacity of Russian refining industry exceeds its capacity to produce refined petroleum products, which is explained by the fact that the Soviet oil refining industry was focused on the production of diesel fuel and fuel oil, while demand for gasoline was relatively low. Today, this leads to the situation when companies produce more low quality petroleum half-stuff than they can process to the finished product level, and therefore, often have to export semi-finished product at discounted price.

 

 

Read the full market research report  


Posted: 14 December 2010, last updated 13 March 2011

See more from Energy in Russia

Expert Views    
Russia’s Oil Refining Industry   By U.S. Commercial Service Russia
Engineering opportunities   By UK Trade & Investment
Biofuels Sector Update   By Foreign Agricultural Service
Hot Tips    
Oil, Gas and Mineral Production in Russia   By U.S. Commercial Service Russia
Biofuels in Russia   By Foreign Agricultural Service