Gasoline vs diesel fuel
Gasoline vs diesel fuel
Russia plans in the near future to align the export duty on light and heavy oil, which will lead to a drop in heavy oil production of heavy oil. At the same time, the Russian ports are so far focused on the handling of heavy petroleum products. Are the terminals expecting a large-scale conversion?
Farewell to fuel oil
The current level of export duty on of heavy and light oil is profitable for refineries, producing heavy oil. Nevertheless, "Energy Strategy up to 2030" approved a year ago by the Russian government says about the "switch from exports of commodities, energy resources to sales of products of deep processing." In this regard, the export duty on light and dark oil products are expected to equalized, which will lead to degradation of refineries. Respectively, this will stir up modernizations at the plants and the proportion of dark oil products (heavy fuel oil and VGO) at Russian refineries will be reduced.
Russia plans in the near future to align the export duty on light and heavy oil, which will lead to a drop in heavy oil production of heavy oil. At the same time, the Russian ports are so far focused on the handling of heavy petroleum products. Are the terminals expecting a large-scale conversion?
Farewell to fuel oil
The current level of export duty on of heavy and light oil is profitable for refineries, producing heavy oil. Nevertheless, "Energy Strategy up to 2030" approved a year ago by the Russian government says about the "switch from exports of commodities, energy resources to sales of products of deep processing." In this regard, the export duty on light and dark oil products are expected to equalized, which will lead to degradation of refineries. Respectively, this will stir up modernizations at the plants and the proportion of dark oil products (heavy fuel oil and VGO) at Russian refineries will be reduced.
As Peter Degtyarev, Director of the Oil and Gas Department of the Russian Ministry of Energy said at the International Congress Oil Terminal-2010, the government is not interested in processing of crude oil into dark product of poor quality, as it looses potential revenues in this case. According to the calculations of the Ministry, the rate of processing at Russian refineries should grow by 2015 from 71% to 80%.
As of now, half of the oil produced in Russia is being refined in the country. According to calculations by Sergei Lukyanov, TNK-BP’s Development Manager, even if the export duty on oil products reaches low level - $ 58 a ton (Ministry of Finance and Ministry of Energy estimates - $ 60 a ton) net income from domestic processing would exceed netback from other crude oil realization channels ($ 258 per ton a year, an average of $ 45 above netbacks of other channels). Thus, crude oil exports will continue to be less profitable than domestic processing, while the share of light petroleum products will rise considerably.
In accordance with the Energy Strategy of Russia, the annual volume of gasoline production in Russia could grow to 43 million tons by 2014, diesel fuel - up to 82 million tons. At the same time, fuel oil production by 2020 may shrank by half.
As the analytical agency Argus says, Russian refineries are planning to reduce significantly by 2020 the export of dark petroleum products and increase exports of naphtha by 36%, gasoline - by 56% and kerosene - by 150%. According to Infotek Consult estimates a surplus of gasoline in Russia might reach 14 million tons annually by 2020, of naphtha - 15 million tons per year, diesel fuel stock will remain at current level (46 million tons a year), and VGO will fall from 11 to 8 million tons a year.
The increased production volumes of light oil products will respectively be shipped from marine terminals for export.
Gasoline overstock
As of now, gasoline exports from Russia reaches about 5 million tons a year, mostly in Africa and the USA. According to Sergei Lukyanov’s forecast, by 2015 the volume could double to more than 10 million tons a year (if local refineries undergo modernization). As Mikhail Perfilov, development director of Argus Media said "if the government's plans will be implemented in its present form, Russia may see a considerable oversupply of gasoline."
At the same time, there are no specialized gasoline terminals in Russia, but they are in the Baltics (Riga, Tallinn, Ventspils). Actually, if the Baltic terminals appear to be closed for Russia, for whatever reasons, gasoline could be transshipped at the terminals of the ports of North-West: Svetly, Kaliningrad, Vitino, Murmansk and Arkhangelsk (each can handled approximately 2-3 million annually), as well as at the Ukrainian ports of Sevastopol and Nikolaevsk. It would be sufficient to ensure 10 million tons export volume, but it should be noted that the Russian terminals’ capacities are limited, especially in depths, some of them (Vitino, Arkhangelsk) have limitations due to climatic conditions, requiring the ice breakers escort.
As to the exports of other light petroleum products (MDO, naphtha, VGO), the situation is simpler here, because there is a number of major port projects being implemented in Russia, export-oriented as heavy and light oils. In addition, some of the existing terminals can be converted for handling light petroleum products.
At the same time in Europe, according to Wood Mackenzie, there is a shortage of diesel fuel, while gasoline demand in Europe continues to fall, due to state tax policy aimed at increased consumption of diesel fuel, as well as increasing the share of biofuels. According to the Vice-President of Wood Mackenzie Ben Holt, there is there is a considerable surplus of gasoline in Europe and at the same time, the shortage of diesel. According to experts, this imbalance will be growing in the future until 2015. However, in order to participate in sharing the diesel "pie", the companies will have to compete for access to the European market, Ben Holt said.
Vitaly Chernov.
As of now, gasoline exports from Russia reaches about 5 million tons a year, mostly in Africa and the USA. According to Sergei Lukyanov’s forecast, by 2015 the volume could double to more than 10 million tons a year (if local refineries undergo modernization). As Mikhail Perfilov, development director of Argus Media said "if the government's plans will be implemented in its present form, Russia may see a considerable oversupply of gasoline."
At the same time, there are no specialized gasoline terminals in Russia, but they are in the Baltics (Riga, Tallinn, Ventspils). Actually, if the Baltic terminals appear to be closed for Russia, for whatever reasons, gasoline could be transshipped at the terminals of the ports of North-West: Svetly, Kaliningrad, Vitino, Murmansk and Arkhangelsk (each can handled approximately 2-3 million annually), as well as at the Ukrainian ports of Sevastopol and Nikolaevsk. It would be sufficient to ensure 10 million tons export volume, but it should be noted that the Russian terminals’ capacities are limited, especially in depths, some of them (Vitino, Arkhangelsk) have limitations due to climatic conditions, requiring the ice breakers escort.
As to the exports of other light petroleum products (MDO, naphtha, VGO), the situation is simpler here, because there is a number of major port projects being implemented in Russia, export-oriented as heavy and light oils. In addition, some of the existing terminals can be converted for handling light petroleum products.
At the same time in Europe, according to Wood Mackenzie, there is a shortage of diesel fuel, while gasoline demand in Europe continues to fall, due to state tax policy aimed at increased consumption of diesel fuel, as well as increasing the share of biofuels. According to the Vice-President of Wood Mackenzie Ben Holt, there is there is a considerable surplus of gasoline in Europe and at the same time, the shortage of diesel. According to experts, this imbalance will be growing in the future until 2015. However, in order to participate in sharing the diesel "pie", the companies will have to compete for access to the European market, Ben Holt said.
Vitaly Chernov.