OREANDA-NEWS. April 24, 2007. Tatarstan’s high-sulfur crude oil will be refined in Nizhnekamsk. If all goes to plan, 21 out of the 31 million tonnes of oil produced in Tatartstan annually will be refined in the republic by 2012. The remaining 10 million tonnes will be similar in quality to light oil from Siberia. The project will improve the quality of Urals oil, making it a more expensive export product.

High-sulfur crude oil from Tatar oilfields will go to the refining and petrochemical facilities that will be build in Nizhnekamsk, Andrei Dementyev, Deputy Minister for Energy and Industry, said at the Pipeline Transport 2007 forum on Tuesday. He said this would improve the quality of Urals oil, Prime Tass news agency reported. Tatneft and the Energy and Industry Ministry were unavailable for comment yesterday.

The idea has long been discussed, and it is supported by the government. In June 2006 the Economy Ministry approved plans to allocate RUR 16.5 billion (approx. $635m) to Tatneft from Russia’s Investment Fund for the construction of refining facilities in Nizhnekamsk. The project is estimated at RUR 130 billion (approx. $5bn). The new complex will include a new oil refinery with an annual capacity of 7 million tonnes of oil, a deep conversion plant as part of a hydrocracking unit, heavy residue processing facilities with a capacity of 3.5 million tonnes a year (fuel oil) and a petrochemical plant with an annual capacity of 900,000 tonnes. The facilities are scheduled to be completed in 2008, 2009 and 2010, respectively.

Inspired by Tatneft’s support from the government, small oil firms – there are about thirty of them in Tatarstan – announced plans to build a refinery with a capacity of 7 million tonnes a year. Technip Italy will prepare a technical and economic feasibility study by 1 July 2007. The refinery will be built at the Kamskiye Polyany settlement in the Nizhnekamsk region. The construction will be completed by 2011-2012. Tatarstan already has one refinery. Located in Nizhnekamsk, it has a capacity of up to 7 million tonnes of oil a year. It is owned by TAIF-NK OJSC.

In 2006, 31.3 million tonnes of oil was produced in the republic, of which about 6 million tonnes was produced by small oil companies. Total capacity of all oil refineries will be 21 million tonnes. Konstantin Cherepanov, at Rye, Man & Gor Securities, said Tatneft produced 25 million tonnes of oil last year, of which 10 million was exported. “This is 5 percent of Russia’s total oil exports in 2006,” he noted.

He said the capacity of the new facilities will not be enough to refine all of Tatneft’s oil. But it is obvious that Russia’s Urals oil will be clearer, which means it will rise in price. “Bashneft also exports high-sulfur oil, accounting for about 2.5 percent of Russia’s total exports,” he added.

Alexander Blokhin, at Ak Bars Finance, says two thirds of oil produced by Tatneft is similar in quality to Siberian Light, and the remaining 7-8 million tonnes of high-sulfur oil will be refined in Nizhnekamsk. The new project is in line with the government’s plans to introduce higher quality standards for Russian oil exports. “Tatneft has to complete the construction before the new standards are introduced,” Blokhin said.