Assessment of Russian Refining Industry (75741 bytes)
Boston Consulting Group (BCG) estimates Russia's refiners could increase their total crude distillation capacity by more than 500,000 b/d by 2000 if all announced expansion projects were completed.
At the same time, planned up- grades could increase the country's yield of gasoline by 5% while lowering production of heavy fuel oil and residues 5%.
Roman Lola, senior consultant based in BCG's Kuala Lumpur office, told a meeting of refiners some of the plant expansions and upgrades are more feasible than others. Feasibility depends on management strategies and access to European Bank for Reconstruction & Development funding.
In the meantime, Lola said, Russia's refiners face problems of low plant utilization, an unsustainable product mix, high distribution costs, squeezed margins because of increased crude oil prices, and pollution.
Current situation
BCG estimates Russian refineries are running at only 50% utilization, compared with more than 90% in the U.S. and 80% in western Europe.
The analyst said Russian refining margins will remain slim as long as utilization rates remain so low. However, the product mix is expected to shift toward lighter products as Russia's economy picks up.
Russia has 28 refineries with an average crude distillation capacity of 200,000 b/d. Almost 5 million b/d of this capacity is served by a total 15,000 km of product pipelines, while more than 1.5 million b/d has to rely on rail, road, and water for product shipment.
Delivery costs for Russian refiners are comparatively high because the average distance from refinery to market is about 1,100 km, compared with only 500 km in the U.S.
Lola identified a total 542,000 b/d of added distillation capacity that could go on stream in plant expansion projects under way or on the drawing boards.
Those projects and planned vacuum distillation, catalytic cracking, hydrocracking, reforming, and hydrotreating units could boost Russia's total products capacity to 5.9 million b/d by 2000 from 5.2 million b/d today.
"Some of these projects are ongoing with contractors," Lola said. "Others are just blueprints. We studied what would happen if they all went ahead, but my judgment is that half of this will be implemented by 2000."
BCG sees recent moves in which Russia's refineries have become part of vertically integrated companies as key to creating conditions in which refiners can meet market demand.
Twenty-three refineries, accounting for two thirds of total Russian capacity, were owned by vertically integrated companies at yearend 1995. This compares with only six refineries providing 25% of total capacity owned by such firms in 1993.
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