'The production of gasoline and diesel is unprofitable for companies today'

In Russia and in Tatarstan, fuel is getting more expensive again, oil companies complain about the loss

'The production of gasoline and diesel is unprofitable for companies today'
Photo: Rinat Nazmetdinov

The trend of rising fuel prices in Russia following the January increase continued in February, the analytical service of Realnoe Vremya found out. What is more, this time gas has also risen in price — by more than a ruble. Gasoline production has become unprofitable, according to market participants, and the tax burden is testing the strength of the oil and gas complex. Read the details in the material of Realnoe Vremya.

Gasoline and diesel are getting more expensive

Retail fuel prices went up again after rising in January. According to the research of Realnoe Vremya, the average prices of AI-92 and AI-95 gasoline in the cities of the Volga Region rose by 29 and 20 kopecks, respectively.

The maximum prices for the 92nd are observed in Cheboksary (43,92 rub/litre) and Ufa (43,60 rub/litre). It is most expensive to travel on the 95th in Yoshkar-Ola (47,03 rub/litre) and in the capital of the Chuvash Republic (47,01 rub/litre).

Fuel has already become more expensive several times this year in all the subjects of the Volga Region. By the holidays, the filling stations of the Republic of Tatarstan have updated their historical highs.

In Kazan, an average of 43,1 rubles is now required for a litre of 92, and 46,52 rubles for the same volume of 95.

Motorists who travel on liquefied carbon gas now “put extra” on top of the previous price of 1,69 rubles on average (25,29 rub/litre in the Volga Region). In Kazan, gas rose in price by an average of 1,25 rubles.

In comparison with the end of February 2020, gas showed the maximum growth among all types of fuel in the Volga Region and increased by 18% from 21,44 to 25,29 rubles per litre. AI-92 rose by 3,3% for teh year, and 95 — by 4,3% — in principle, within the limits of inflation. A litre of winter diesel rose the least (+2,2%).

“It is easier for partners to sell oil abroad”

In Russia, since the beginning of 2019, a damping mechanism has been in place in the field of oil refining taxation, preventing price spikes at filling stations both up and down, and keeping them at a stable level. However, the high level of tax burden and regulatory mechanisms of export force oil companies to fight for their business.

Vladimir Karpov, the head of the department for the sale of oil and petroleum products at Tatneft PJSC, recalled that prices for petroleum products were frozen in 2018. Later, prices at gas stations were allowed to increase by an amount not exceeding inflation. In 2018-2019, fuel growth did not exceed the latter.

“Last year, the production of the 92 gasoline was also unprofitable, and in some months the loss reached minus 6k-7k rubles per tonne. The processing in April-May and in September-October brought a loss. We, the oil industry, pay taxes on oil, then for processing. Small factories can not withstand such regimes. And large factories began to limit production. Our company (Tatneft) processes tonne in tonne, in spite of everything," said Karpov.

According to him, today Russian oil companies have entered the first band of OPEC+, stopped some of the fields that are called unprofitable. The issue of removing the benefits for the developed fields, as well as for hard-to-recover and high-viscosity oil, is being considered.

“What does it mean to stop a high-viscosity deposit? That means freezing a few hundred billion dollars. The technology of high-viscosity oil production itself is very complex. We need to pay attention to what has already been done. Our company today has a well fund of several tens of thousands. Each well costs 70-100 million rubles. If we stopped, we need to raise the installation. This is huge costs," Karpov added.

At the moment, the company has reached a high depth of oil refining at TANECO — there are no more fuel oils. The company does not ship oil products for export, everything is absorbed in the domestic market, Karpov assured. At the same time, he believes that diesel fuel in Russia is in excess, so the country could export half of it, “but we do not have enough gasoline today, the company receives minus 5,000 rubles (per tonne) for gasoline today”.

Karpov believes that there is a surplus of diesel fuel in Russia, so the country could export half of it, “but we do not have enough gasoline today”. Photo: Rinat Nazmetdinov

“We need balanced decisions. Today, there are taxes, but enterprises do not have profits," the interlocutor added.

Wholesale gasoline prices barely rose

At the same time, for example, on the St. Petersburg International Commodity Exchange, prices, with the exception of winter diesel and gas, did not change much in the last month.

Diesel fuel rose by 2,8% from 48,700 rubles per tonne to 50,000 rubles per tonne. Gas also rose significantly (by 16%) — from 29k to 33,8k rubles.

According to some experts, the reason for the increase in retail fuel prices depends on the situation in the regions. Perhaps, there are problems with the refinery somewhere, they say.

By Yevgeny Khramov
Tatarstan