“The problems and prospects of oil-refining industry” E.S.Stroev

 

Source: Journal of Analytical Federation Council of Russia № 22 (434)

The Russian Federation is a significant position in the world reserves and production. According to expert estimates, Russia has about 6% (this percentage is actually much higher because not all fields are explored) of global proven oil reserves. Today in Russia produces about 12% of global oil production. In 2009, Russia ranked first in the world in oil production and continues to be among the leaders.

Despite these impressive figures in the country there is a shortage of fuel and exorbitant prices for it. Nearly every citizen of our country asked the question why the oil-producing country in the price of gasoline is sometimes higher than in countries that import it. Is the set of reasons for this situation.

Dynamic economic development requires a significant fuel consumption. Indeed, Russia, as a leading oil producer, is also one of its major customers, trailing only the U.S., China, Japan and India. In this regard, it would seem logical to follow at home to balance supply and demand. However, companies benefit from export crude oil: the volume of the oil produced about half is exported as crude oil.

One major reason for this is inefficient refineries (the Refineries). A very important indicator of the efficiency of oil refineries is the indicator of the depth of oil refining. So, the average depth of processing Russian oil refineries is about 70%. While depth of processing in Europe and the U.S. is 95%. Backward technological base of the modern Russian oil production leads to a large number of heavy petroleum products, primarily oil. At the same time significant amounts of having no domestic demand of fuel oil, are exported to foreign markets as raw materials for further recycling. Their implementation at a low price leads to a shortfall in revenues.

What kind of performance can be discussed if the 30 refineries, located in Russia, 9 has been put into operation before the Second World War, 5 more plants built before 1950, another 10 plants – up to 1960 inclusive. Thus, half of the refineries are over 60 years. This indicates a strong depreciation of refining capacity. Virtually all existing refineries need modernization and retooling.

A significant problem is the oil industry in Russia a high degree of depreciation of fixed assets, amounting to 80%, as well as the use of outdated energy-and cost-imperfect technology. As a result, the industry is characterized by a high-power, which adversely affects the economic efficiency of oil refining. Specific consumption of energy in existing Russian refineries are 2-3 times higher than their foreign counterparts.

As a result, oil-refining industry has some specific features: the aging refineries, low depth of oil refining, low capacity utilization, lack of facilities for recycling oil, poor use of modern technological processes.

In addition to the inefficient operation of their plants is not enough. It should be noted that in the central part of Russia there are practically no. Built during the Soviet era factories remained in Lithuania, Belarus and Ukraine. In addition, self-traded fuels only 20% of the plants. Others, including market infrastructure – oil storage tank farms and terminals owned, usually vertically integrated oil companies (hereinafter VICs).

In this situation, government efforts should be aimed at addressing an oil refinery. Russian President D. Medvedev at a meeting on energy development among the key tasks that require special attention in terms of oil refining industry, highlighted the need to accelerate the modernization of existing and construction of new refineries, as well as to produce high quality and competitive petroleum products that meet international standards.

Prime Minister also has repeatedly said the continuation of the plans of radical modernization of the domestic refineries.

Despite the measures taken by the Government measures, the situation remains very complicated. Modernization of existing refineries is extremely slow, no visible progress on construction of new ones. On the Yamal Peninsula has opened a new plant motor fuel company “Purnefteprodukt.” It is aimed primarily at the local market. “RussNeft” only plans to build a refinery in the Bryansk region, “Rosneft” – oil refinery for 20 million tons in Primorye, “Tatneft” is building a refinery in Nizhnekamsk. One of the projects being implemented by the Government of the Russian Federation and the leadership of the Oryol region is the construction of refineries in the passage of the largest oil pipeline “Druzhba”. The new plant will process up to 4 million tons per year, with an estimated depth of crude oil – 96.5%. This project will provide the surrounding areas of petroleum products EURO 4 and EURO 5, which would reduce the regional budget expenditures for the operation of public transport and the supply of agricultural and fuel oils. Area has already been allocated plots of land, found investors. However, while construction slowed because of the lengthy bureaucratic approval procedures.

Insufficient number of refineries and their ineffectiveness leads to a lack of competition in the market of motor fuel.

Regional retail markets are monopolized. Despite the creation of networks of independent market operators, they are tied to the infrastructure of oil processing and storage of petroleum products owned by vertically integrated companies. According to FAS Russia is now more than 50 subjects of the federation share VICs in the retail market exceeds 35%, while one in three is 50-60%. “Rosneft” is dominant in 15 regions, “LUKOIL” – in 11 regions, the third place in “Surgutneftegas” (four regions), the fourth divide “TNK-BP” and “Gazprom Neft” (three). Only in 20 regions dominated by independent vertically integrated players.

According to the MMNS, in the Moscow region in 2250 working stations, of which 1,000 belong to independent operators. In particular, in Moscow, of the 850 stations 350 are independent.

The continued monopolization of motor fuels also contribute to the following reasons:

official dumping by major oil companies are gradually increasing the wholesale prices they can afford to sell at fixed retail prices close to wholesale, a long time because of their business scale and selling gasoline – only a small fraction of their work. Thus they cause striking a blow to independent gas stations, whose number and so has been steadily declining. Thus, in the Sverdlovsk region of the end of 2004, a small network stations owned 36% of the market in 2007 – already 32%. In the Khanty-Mansi Autonomous District until 2008 were the only independent station in 2011, is less than 70% of the region belongs to the independent filling stations;

shortage of high-quality fuels on the market. MADI is estimated gasoline consumption will increase by 2015 to 38 million tons of demand will be offered for high-grade gasoline. The structure of production today – only 15% of the AI ​​95 and AI 98. Experts previously predicted that by 2010 Russia will face a shortage of high-octane motor fuel that actually happened. An additional factor of the fuel crisis is to increase the export of gasoline;

analysis of the production of motor fuels shows that the vertically integrated oil companies do not pay enough attention to refining. Basically they took the path of modernization of old plants. Indeed, the construction of new refineries – is an extremely resource-intensive exercise for even the largest companies. Without state support, for example, by zeroing in import duties on import of equipment for refineries, few people decided to build;

lack of real competition from alternative fuels. The reason – the absence of legislation regulating and stimulating the use of alternative motor fuels;

far from the civilized functioning of domestic commodity exchanges, petroleum products. Often, there is preliminary agreement of major market participants. Dishonest behavior is demonstrated by the large companies to foreign stations. FAS recently released prescription big players “TNK-BP», «Lukoil», «Gazprom Neft”, “Surgutneftegaz” with the requirement to provide equal conditions for the supply of fuel on their own and others’ station. However, to monitor compliance with these requirements is very difficult. In rare cases, can prove antimonopolschiiki price collusion, but more often they are limited to recommendations that can be done, but you can not perform.

With the current state of affairs can not be tolerated. State must focus on addressing petroleum industry. Particular attention should be paid to the state support of construction of the refinery complex on the basis of modern technologies.

Further development of the sector requires a balanced system of incentives and disincentives that promote the optimal combination of private and public interests of the sector. Actively develop and apply the antitrust laws. In addition, a more flexible use of measures of tax, customs tariff and technical regulation.

E.S.Stroev, Honorary Chairman of the Federation Council,
Member, Committee on Legal and Judicial Affairs,
Doctor of Economics,
Academician of the Russian Academy
Agricultural Sciences

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