OREANDA-NEWS. October 26, 2009. The Ryazan Oil Refinery owned by TNK-BP is going to switch completely to production of diesel fuel of the Euro-5 standard by 2015. Dmitry Bedarev, General Director of the Ryazan Oil Refinery, told Argus about the development plans of the refinery and the current situation in the oil refining industry, reported the press-centre of TNK-BP.

– When the Ryazan Oil Refinery will fully switch to production of Euro-5 motor fuels?
– We are shaping our strategy according to the technical regulation adopted in Russia, which obliges us to do this by 2015, and we are getting ready now. This technical regulation is rather complex and demanding. The problem is that there are 27 large oil refineries in our country that need to be reconstructed and upgraded to comply with this regulation. All major oil companies have to build up new processes and design new equipment during this period. However, there are practically no resources in Russia for designing and manufacturing such new equipment. Therefore, the chance that many companies will not be ready to comply with the regulation by the required time is fairly high.

– How many Russian refineries, in your opinion, will manage to upgrade their facilities by 2012?
– I think that about a half of them will manage to do so. Those who do not switch to the new standard will engage themselves in production of oil products for agricultural producers and military needs, which do not require fuels of high ecological standards.

Much will depend on government decisions. Changing the excise tax rate, as it was done in Ukraine, will stimulate production of ecologically cleaner fuels, which will be beneficial for us.

– Do you think that the proposed equalization of export duties for dark and light oil products will increase the depth of conversion at oil refineries?
– Unification of taxes and duties is an efficient measure, but I am against abrupt moves. This move would be advantageous for light oil products and disadvantageous for dark products. In Europe, oil refineries have secondary processes and can squeeze up to 60% of light oil products from our fuel oil. In Russia, we do not have such secondary processes, and that is why we are mostly engaged in export.

Look at Europe. Technical regulations were being introduced there for decades, and producers were informed about their enforcement 5–6 years earlier. Importantly, such decisions were not overruled or rescinded, and everybody kept moving toward the assigned date. In Russia, we say we are going to catch up with Europe but nobody is actually ready to do so.

In this situation, it would be better to set a longer but more realistic period and encourage transition with governmental concessions and bank credits. After adoption of new technical regulations in Europe, oil refineries were given privileged credits and confessional loans and the government provided guarantees for such loans.

– What is the cost of Ryazan Oil Refinery modernization for production of Euro-5 fuels?
– Roughly, modernization of all oil refineries incorporated in TNK-BP will cost US1.3 billion by 2015. We have resumed financial support for construction of a vacuum section at the AT-6 unit, which will be able to produce much more raw materials for catalytic cracking. Apart from that, we are going to upgrade the catalytic cracking unit and build a new bitumen unit. The market need high-quality bitumen for construction of good roads. We have already ordered design of a bitumen unit. Construction of a vacuum section and a bitumen unit is estimated at US200 million.

In 2001, we can launch gasoline isomerization units and increase gasoline production. For transition to production of Euro-5 fuels, we have to build an additional unit for treatment of gasoline from the catalytic cracking unit. Construction of this gasoline treatment unit is scheduled for 2013, but everything will depend on the situation. The new technical regulation implies complete abandonment of Ai—92 gasoline, which now accounts for more than 50% of all gasoline used in our country.

– How will this affect the output of all oil products?
– The output of fuel oil will decrease by 2–2.5% by 2012. We have a long-term plan implying 15–20% reduction of fuel oil production by 2020. The production of bitumen will be increased from the current 400,000 tons a year up to 700,000 tons a year by 2012. Now we are producing medium-priced bitumen and want to improve its quality.

The output of gasoline will increase by 1% by 2012 and the output of diesel fuel by 0.5%. In 2010, the volume of Euro-5 diesel fuel production will remain at the level of 140,000 tons a month. We will be able to increase the output of Euro-3 and Euro-4 fuels from the current 80,000 tons a month up to 100,000 tons a month provided that the demand for these products grows.

Production of fuel of the same quality with a sulfur content of 10 ppm is preferable for our refinery as we can use all pipelines and tanks for this fuel without worrying that some valve may fail somewhere and fuel with 0.1% of sulfur will get into a wrong tank and spoil some 20,000 tons of the product in this tank.

– Is the Ryazan Oil Refinery still producing fuels with 0.2% of sulfur?
– We ceased producing diesel fuel with 0.2% of sulfur back in May and  in June started producing diesel fuel with no more than 1% of sulfur in the amount of approximately 100,000 tons a month.

– When are you planning to stop production of diesel fuel with 0.1% of sulfur?
– If the government differentiates the excise tax rates, production of higher-quality products will become more profitable for us, and we will stop production of diesel fuel with 0.1% of sulfur. If the excise tax rate does not change, export duties remain the same, other refineries do not choose to produce better-quality diesel fuel, and we have no possibility to offload higher-quality diesel fuel to pipelines, we will continue production of diesel fuel with 0.1% of sulfur. Another factor is whether or not Russian Railways is going to reform its rolling stock.

Agricultural producers are ready to buy diesel fuel with 0.5% of sulfur but at lower prices, and price is an important factor for them. We offer privileged prices to them and supply diesel fuel with 0.1% of sulfur at the price of diesel fuel with 0.5% of sulfur.

– How did the demand for motor gasoline change this year?
– The production of Ai—95 and Ai—98 gasoline brands increased by approximately 4% and 2%, respectively, this year. The demand for fuel for private cars in the Moscow Region remains the same. However, the volume of air transportation dropped in spring, and we do feel that. This market has stabilized now and even shows signs of growth. The consumption of diesel fuel has diminished, and providers of vehicular and rail transportation services are buying less.

– Is gasoline produced by the Ryazan Oil Refinery exported now?
– We only export alkylate and straight-run gasoline (naphtha).

– Are the repairs started this fall at the refinery over now?
– We have repaired eight units, including AVT-3, in the period between September 3 and October 19. Four of these repaired units are already put into operation. Beginning from October 21, the refinery will return to its normal refining capacity of 42,500 tons of oil a day compared to 34,000 tons a day during the repairs.

By the way, oil refineries in Europe work 5–6 years nonstop, and in this aspect we are lagging far behind as every stop means loss of production. We are now getting ready to ensure safe and fail-free operation of our refinery for up to three years without interruption.