Small and medium-sized Russian refineries, which predominantly rely on exporting their products, were expected to run at around 50% capacity in April with international buyers distancing themselves from the country’s oil after the invasion of Ukraine, reports S&P Global.
Halting crude intake
Meanwhile, some bigger refineries, which do not have scheduled maintenance, could increase runs to use the crude now remaining in the country, though others have halted crude intake as they cannot ship their production.
Tuapse refinery
It produces feedstock such as fuel oil, naphtha and vacuum gasoil for export, rather than finished-grade products — has halted crude intake several times in March. Ilsky refinery in southern Russia has also halted crude offtake.
Consequences
Up to 3 million b/d of supply could be taken off international crude and products markets in coming months, the head of commodity trading house Gunvor Torbjorn Tornqvist said recently.
Part of the impact on Russia will come as the country’s refiners start cutting back their crude runs as key diesel exports to Europe continue to dry up. “That will force Russian refiners to cut back. In fact, we already see that,” Tornqvist said.
Difficulties
According to Russian deputy prime minister Alexander Novak, refiners continued to supply to all markets in March, according to previous commitments, and have not been reducing production. But looking to April and May, “there are difficulties, our companies are deciding how to deal with logistics, payment,” Novak said.
Meanwhile, the energy ministry is proposing to defer planned completion of refinery upgrades due to the sanctions on Russia. It is proposing to the government to extend the deadline by two years to 2028, the daily Kommersant reported.
The first phase of their modernization
Refineries have completed the first phase of their modernization, which started in 2007 and has led to the replacement of outdated equipment from Soviet times.
They have been implementing several projects aimed at increasing their complexity and further reducing fuel oil output while increasing gasoline and distillates yields.
While initially only the big refineries, belonging to oil majors were undergoing modernization, more recently medium-sized independently-owned refineries have started their own upgrades.
Impact of sanctions
Previous sanctions on Russia led to delays in some of the projects, although the government strove to replace some of the imported equipment with home-made kit.
However, most projects still rely on imported technology, especially catalysts, which are also central to refinery operations.
Leading Western energy services providers have suspended future business in Russia and halted equipment supplies in response to the latest sanctions.
The second largest producer
In other news, Shebelinka GPP, Ukraine’s second-largest producer of diesel and gasoline, which operates under the Shebel brand name, has remained largely offline since Feb. 26, due to threat of shelling, operator Naftogaz said.
However, Ukraine’s largest oil refinery, UkrTatNafta in Kremenchuk, continues to operate despite the war, a company spokesperson said March 24.
Kremenchuk, in the center of Ukraine, has not been under threat, was well-protected and not expected to face any immediate attack, a government source has said.
UkrTatNafta, capable of processing about 12 million mt/year of crude, was focused on refining domestically extracted oil due to the closure of ports and the suspension of oil imports.
Ukraine, which relies on imports of gasoline, diesel fuel and LPG to meet domestic demand, is facing shortages of motor fuel throughout the country.
It has started importing diesel and gasoline from Lithuania, bypassing Belarus, which is helping Russia in its invasion, industry sources said.
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Source: S&P Global
