Russian refineries to boost production on threshold of high season

Healthy demand for petrol has pushed down Russian fuel stocks and spurred prices. To avoid a deficit, the Ministry of Energy wants major Russian refiners to increase throughput despite unfavourable economics.

Russian oil majors have been asked to ramp up runs at the country’s bigger refineries to secure sufficient petrol stock accumulation by 1 May, says S&P Global Platts adding that prospects for refiners look dim due to unfavourable economics. After a recent meeting of the Russian Ministry of Energy with Deputy Prime Minister Alexander Novak and the country’s Federal Antimonopoly Service, key producers agreed to direct more of their oil for processing at domestic refineries. Volumes were not specified, but officials indicated that the increase would be gradual.

Against the background of healthy demand, Russia’s petrol prices increased dramatically from late December into January, while stocks decreased to critical levels causing concerns that the volumes usually required for the active driving season would not be available. According to data from the Ministry of Energy, petrol stocks amounted to 1,206 million tonnes on 25 January. The ministry has recommended accumulating 1,6-1,7 million tonnes by 1 May.

The decrease in stocks became a result of months of run cuts caused by poor refinery economics and shifting production from petrol to naphtha. In January, Russian refineries processed 22,784 million tonnes (about 5,4 million bpd) of crude, which was down by 7,3% year on year and 1,2% from December, reads the ministry’s data. Petrol production in January totalled 3,208 million tonnes, down 6,1% year on year and 2,5% month on month. Smaller and medium-sized refineries are expected to keep output low or even halt completely in February due to poor economics.

Another reason for weak production in the recent months was maintenance at the number of Russian refining facilities including Volgograd and Nizhny Novgorod refineries. A shutdown of the Khabarovsk refinery in the Far East has also caused shortages elsewhere, although additional volumes were supplied from other refineries. Now the refinery is back and operating at full capacity.

In addition, Lukoil reported lower output at its Russian and European refineries in 2020. Last year’s overall throughput decreased by 14,7% year on year and amounted to 58,6 million tonnes. In the fourth quarter of 2020, throughput totalled 13,1 million tonnes, which was 11,5% down compared to the previous quarter. The company attributed the reduction to 'optimisation' at some plants against the background of lower oil product demand and refining margins caused by COVID-19 and maintenance works.

By Anna Litvina