Russian independent oil refineries (refineries), which account for about 14% of the market, are forced to operate below the profitability threshold. The reasons are the lack of exports, the complexity of domestic pricing, the rising cost of logistics and the high key rate. Representatives of the companies believe that the situation can be saved by lifting the ban on exports and VAT refunds for non-fuel producers. The Expert Council of the State Duma Committee on Energy intends to hold a meeting in March on the problems of independent refineries. Experts believe that in this situation it is advisable to develop and approve schedules for the transportation of petroleum products for export, which will ensure export quotas for specific refineries, taking into account the needs of the domestic market. Otherwise, Russia may face a shortage of raw materials for the chemical industry and rising prices for motor fuels.
Problems of independent refineries
The Expert Council of the State Duma Committee on Energy will hold a meeting in March with the invitation of oil refiners and a comprehensive assessment of the necessary measures of tax and non-tax support for this sector. The deputy chairman of the committee, Yuri Stankevich, told Izvestia about this. The reason was the appeal of industry representatives to the lower house of parliament.
The owners of independent refineries express concern about the economic conditions in which they have to work.
"We are facing a number of serious challenges, including export restrictions, the complexity of domestic pricing for our products, a high key rate, and rising logistics costs. All these factors negatively affect our profitability and force us to reconsider our work strategies," a representative of one of the mini-refineries told Izvestia.
According to him, enterprises have to buy oil at Argus quotes, and sell finished products at monopolistically low prices on the domestic market.
"For example, we buy oil at 45 rubles per liter, and sell straight—run gasoline at 36 rubles to SIBUR's subsidiaries," the source said.
According to him, companies have to explain to the tax authorities why they are trading below cost. While buyers complain about the lack of an export alternative and set their prices.
In addition, as an industry source told Izvestia, logistics services have doubled over the past three years, and the high key rate makes it difficult to attract working capital.
— These conditions threaten the stability of our business and create significant difficulties for the further development of the sector. When the government decided to ban exports, it aimed to eradicate gray exports, but the customs documents show where the oil products come from," the source told Izvestia.
According to him, the above-mentioned problems are typical for all Russian mini-refineries.
— I think that the situation can be saved by lifting the ban on exports and VAT refunds for non—fuel producers, - said a representative of one of the plants.
The spool is small
According to the Independent Analytical Agency of the Oil and Gas Sector (NAANS-MEDIA), the share of independent refineries in the total volume of oil refining in Russia is about 14%. They produce 88% of polymer bitumen binders, 50% of tar for bitumen, and 25% of bitumen. In addition, according to her, the share of independent refineries in the production of gasoline is 5%, diesel fuel — 6%, jet fuel — 3%.
"These products are strategically important for the restoration of road transport infrastructure, primarily in new Russian regions, the production of bitumen—containing and roofing materials," said Tamara Safonova, CEO of NAANS-MEDIA.
According to her, the market habitually uses quotes from one agency, which in some cases leads to a disparity in oil purchase prices and the cost of selling products on the domestic market, which are squeezed by export restrictions, in particular, for the mini-refinery sector.
Currently, Russia has a ban on the export of petroleum products for non—producers - these include traders, oil depots and refineries with a production capacity of less than 1 million tons of fuel per year. There are about three dozen such plants in the country. They are not members of vertically integrated oil companies and process more than 1 million tons - 10 refineries.
By imposing a ban on the export of petroleum products, the authorities hoped to curb gray fuel exports and saturate the domestic market. Such exports mean a situation where traders buy petroleum products at a price for the domestic market, and sell them for export at a higher price.
The Ministry of Energy did not provide Izvestia with a comment on the expediency of implementing the measures proposed by representatives of the mini-refinery.
SIBUR, in turn, informed the editorial board that the company's needs for straight-run gasoline are primarily provided by its own production and supplies under long-term contracts from major manufacturers TAIF-NK and Taneco.
"This provides a total of more than 85% of the necessary raw materials. Episodic supplies from mini-refineries account for only 14%, several hundred thousand tons per year. The total volume of gas gasoline (BGS) produced by Russian mini-refineries is about 1.3 million tons. SIBUR buys just over a quarter of this volume on the spot market," the company noted.
They added that purchases of straight-run gasoline from mini-refineries are carried out at spot prices, which are formed on the basis of netback.
The Federal Antimonopoly Service told Izvestia that they "have not received any appeals or complaints about SIBUR's actions regarding the purchase of fuel."
For export on schedule
According to Yuri Stankevich, of course, the activities of independent refineries should be the focus of systematic attention of government authorities.
— At least, this is due to the contribution of such enterprises to the total volume of oil refining, which, according to available estimates, is 10-13%. An additional factor is the need to ensure a fuel surplus on the domestic market in the face of the risk of terrorist attacks," the source said.
He recalled that the Ministry of Energy had previously used the practice of concluding agreements with independent refineries. In exchange for obligations to build oil recycling facilities, the plants acquired the right to receive a refundable excise tax. Independent refineries found themselves in worse conditions than the industry's flagships at the stage of the "tax maneuver" initiated by the Ministry of Finance, having significantly lost profitability five to seven years ago.
— The proposed approach of allowing exports to non—producers and VAT refunds is the most obvious step in support of independent refineries in economic logic. But the government will definitely not support it in the current conditions, fearing an uncontrolled rise in prices on the domestic market and a potential shortage of fuel for the reasons outlined above, — says Yuri Stankevich.
In turn, Tamara Safonova noted: given the expediency of increasing foreign exchange earnings of enterprises, state revenues, and the application of non-discriminatory principles in the export of petroleum products, it is important to consider options for the abolition of customs duties, which imply the cessation of production activities of enterprises with processing volumes of less than 1 million tons per year.
— Back in October 2023, according to government Decree No. 1637 dated 05.10.2023, a customs duty for the export of petroleum products in the amount of 50 thousand rubles was introduced for such enterprises. Traditional fuels produced by mini-refineries, namely, fuel oil, gasoline and diesel fractions, are still in demand on the foreign market, and profitability from sales is higher relative to the domestic market," she recalled.
In her opinion, in order to ensure the export of petroleum products by the producers themselves, and to exclude the resale of exchange volumes for export, it is possible to consider the feasibility of developing and approving schedules for the transportation of petroleum products for export (by analogy with schedules for the transportation of oil for export).
— This will ensure export quotas for specific refineries, taking into account the needs of the domestic market, — said the interlocutor of Izvestia.
The reduction of production by independent refineries will have a serious impact on the domestic market — there may be a shortage of raw materials for the chemical industry and rising prices for motor fuel.
According to Tamara Safonova, with the periodic shortage of motor fuels in the domestic market, it is difficult to overestimate the contribution of the independent refining sector to the uninterrupted supply of the Russian market.
— In addition, as part of the implementation of the national project "Development of chemical production", it is independent refineries that can provide new production facilities with raw materials. Against the background of the growth of electric transport in the world, fuel oil and other heavy fuels of Russian origin are still in high demand on the foreign market, widely used by agricultural producers, as well as as fuel for steam boilers, boiler installations, industrial furnaces, and power plants," she added.
The operation of independent refineries, according to our estimates, provides about 20 thousand jobs, enterprises are implementing social projects, the expert concluded.
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