Investment in refineries in the former Soviet Union (FSU) continues to be reined because financial institutions do not consider downstream projects attractive.
This is the view of Gianni Bachiddu, executive vice president of international sales for Foster Wheeler International Corp., Reading, U.K. His company is waiting on funding of three projects and negotiating for 10 more.
"Downstream projects offer no return on investment under current legislation," Bachiddu said. "Investment tends to go into upstream projects, where operators can at least sell part of their crude oil production on the international market. Refined products go to local markets, and only excess goes outside. There is never enough to support large initiatives."
Foster Wheeler has been involved in a study of the Mazeikiai refinery in Lithuania near the border with Latvia. The contractor's assignment was to identify how the refinery could be upgraded to western standards.
"The Mazeikiai refinery needs installations to improve the quality of automotive fuel," Bachiddu said, "There is growing demand for high quality fuel. Consumers are increasingly buying western cars, and these cannot run on low quality gasoline."
SUPPLY BOTTLENECK
Since the split of the old Soviet Union into independent states, Lithuania has had problems with obtaining supplies of Russian crude oil through the existing pipeline. There is no alternative supply at present.
Fluor Daniel Inc. has carried out a study of construction of a product terminal near the Latvian capital, Riga. This could be used also to import western crude oil for the Mazeikiai refinery.
Bachiddu said the Lithuanian government has issued tenders for the product terminal in the hope that financial institutions will provide backing. He sees the European Bank for Reconstruction & Development as the only hope for financing the terminal.
RUSSIAN PROJECTS
Foster Wheeler also has signed an agreement for an alkylation project at the new Ufa refinery in the Western Urals region of Russia. Again, the aim of the upgrade is to improve gasoline quality.
Bachiddu said Foster Wheeler intends to provide engineering design and materials for the project. Construction work would be carried out by local companies to minimize the refinery's outlay of foreign currency.
Foster Wheeler has conducted a study of a proposed revamp of a delayed coking unit at the Novokuybitschev refinery. The contractor is completing a similar study at the Perm refinery for a delayed coker.
Besides these "concrete" projects, Bachiddu said, Foster Wheeler is negotiating 10 other refinery upgrades.
"Proposed projects at Perm, Novokuybitschev, and Omsk have the greatest possibility of going ahead," Bachiddu said. "Marketing of petroleum products in the foreign market is now the essential source of funds for these projects."
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
