Processing in Russia declines in March
Processing at Russian refineries in March dropped 5.2% year on year, according to data from statistics service Rosstat, cited by the country’s TASS news agency. Over the first quarter, processing rose 3%, it said.
Refineries started reducing or halting throughput in the wake of Russia’s invasion of Ukraine in late February as international buyers avoided Russian-origin products due to sanctions, self-sanctioning and reputational risks.
Tuapse and the Novoshakhtinsky refinery have been among the first to halt processing, according to market sources.
Taif briefly suspended operations in April as it couldn’t find a home for naphtha, but has since restarted. Naphtha was particularly hit hard, with exports estimated to be down more than 20%. Russia had been exporting naphtha at an annual rate of around 24 million-25 million mt, having almost doubled in recent years.
Russian refineries have been facing rising challenges to place feedstocks, such as fuel oil, vacuum gasoil and naphtha, due to reduced or lack of buying by the US and European refiners.
In its first-quarter results call, US refiner Valero said it was replacing Russian M-100 fuel oil with product from the Middle East and South America.
In Europe, refineries are looking to replace VGO with LSSR.
Meanwhile, refineries are looking for outlets for the excess fuel oil, since around 80% of it is typically exported, and the domestic heating season, which boosts domestic demand, has come to a close.
For now demand for bitumen, as refineries switch production away from fuel oil, remains slack as road construction is yet to start.
In a drive to cut fuel oil output, refineries that are completing their delayed cokers, such as Norsi, are expected to launch them shortly.
Meanwhile, Russian domestic crude for processing at refineries in May has traded at lower prices month on month due to a weaker Brent market and a stronger ruble, as well as weaker demand.
Spring sowing works have provided an extra outlet for distillates, which smaller refineries produce, giving them a lifeline, with runs expected to rise slightly to around 60%-70% in May, from 50% in April.
Larger refineries might also run at slightly higher throughput as they need to accommodate the crude oil that is falling out of export plans. The EU is likely to propose an embargo on Russian oil in its next sanctions package against Moscow.
Separately, Russia and Ukraine reported new damage to oil infrastructure in border regions in late April, as fighting continued. Russia’s Defense Ministry said April 25 that a missile attack on the Kremenchuk refinery destroyed fuel-producing parts at the plant, and oil product storage tanks on April 24. Operations at Kremenchuk have been suspended since an earlier attack on April 2. Until the attacks, Kremenchuk had been the only refinery supplying the local market after the Shebelinka GPP refinery was taken offline Feb. 26 due to the threat of shelling following the invasion. Ukraine’s Odesa and Lysychansk refineries were hit by airstrikes in April, though both had been out of action for more than 10 years.
Russian officials said April 25 that a fire had broken out at a Russian oil storage site in the western Russian city of Bryansk. The facility is located around 140 km from the Ukrainian border. The Russian Energy Ministry said the main fuel reserves in the region were unaffected, with one diesel tank damaged in the incident.
In other news, Turkmenistan’s two refineries, Turkmenbashi and Seydi, produced 6.4% more 95 RON gasoline than planned in the first quarter, with production rising 12.4% year on year, according to local media reports.
The two refineries also processed 10.3% more crude oil than planned.
During the first quarter the refineries produced for the first time 98 RON gasoline, Jet A1 and marine gasoil, which meet international standards.