WATCHING THE WORLD FSU OIL TRADERS KEY TO REFINERY REVAMPS

Former Soviet Union refinery upgrading programs are gathering momentum.

For projects involving less than about $10 million, FSU refiners have recently been able to find their own funding.

The key to breaking the refiners' financing deadlock has been FSU's oil traders, says Lionel Chambers, director of Stone & Webster Engineering Ltd., Milton Keynes, U.K.

"FSU oil traders shift products from refineries to ports," Chambers said. "Their transactions generate funds which are increasingly being used to help revamp refineries."

FSU refinery managers have been working with oil traders on proposals for new products. If oil traders are convinced there is a market for the products, they have been aiding revamps to facilitate supplies.

Chambers said, "FSU refiners' customers are still generally having difficulty in paying for products they receive. Therefore, refiners themselves are usually unable to pay for feedstocks."

FUNDING

Although FSU refining capacity is down, exports of products have increased. Oil traders are making it happen, Chambers says.

"Trading is the place to be as a Russian oil entrepreneur. It is not all doom and gloom at the moment."

Chambers reckons this year and next could be good for FSU refinery projects as the momentum builds following feasibility studies. The U.S. Export-Import Bank has put up a $2 billion loan to fund FSU oil and gas projects, and this is expected to cover some refinery upgrades in the wake of studies.

Stone & Webster is one of a number of western engineering companies that have completed upgrading feasibility studies and now hope for major project awards. The company has four FSU projects in progress.

The most advanced project is at Kremenchug refinery in Ukraine.

There, Stone & Webster completed a feasibility study of revamping the plant's fluid catalytic cracker. It also completed front end engineering design valued in the "low millions of dollars" range for revamping the FCC. Stone & Webster has submitted a proposal for detailed engineering, construction, and procurement.

CONFIDENCE

Chambers said the proposed FCC upgrade will provide a 60% increase in gasoline production from the plant through increased capacity and yield improvement.

A similar project is envisaged at Yaroslaval refinery in Russia, where Stone & Webster has carried out a feasibility study and is performing front end engineering.

At the Angarsk refinery in Siberia, Stone & Webster has completed a feasibility study of upgrading the plant's FCC. Angarsk's management is expected to move soon into front end engineering.

In mid-October Stone & Webster completed a feasibility, study of upgrading an FCC unit at the Krasnovodsk refinery in Turkmenistan.

"There are indications that refiners want to speed things up," Chambers said. "They are becoming more confident. But the best indication of confidence is that the refiners are willing to fund all these studies."

Issue date: 11/21/94