1. Large Oil Refinery From Private Company

Large Oil Refinery From Private Company

12.12.2012

For the first time over the past 30 years an up-to-date private large oil complete-cycle oil refinery is being built in the settlement of Antipino near Tyumen.

Little is known about Antipinsky Oil Refinery: it is situated near Tyumen on the sixth kilometer of the old Tobolsk highway (tract), it is being built stage by stage. The first phase the construction of which began in 2004 was intended only for 400 thousand tons of oil per year. Now the construction of the third phase is in full swing. The third phase is built in several stages. Workshops of the third phase will be commissioned from 2013 to 2016. Upon the completion of works the capacity of the refinery will amount to 7.5 million tons of oil p.a. (2013), the quality of oil products will comply with Euro-5 standard (2014), and the processing depth will increase up to 94% (2015). It should be added that a private company is building this complete-cycle refinery, and this fact triggered our curiosity which we tried to bate during our meeting with Dmitry Mazurov, Chairman of the Board of Directors of Antipinsky Oil Refinery.

There is little information about you. Why?

We don’t think it right to speak prematurely. It will look like boasting. It will be correct to invite you after commissioning and show everything: here is our modern refinery, the highest quality products, developed infrastructure. And now it wouldn’t be right to talk about it halfway, in my opinion.

But as of today no company in Russia is building a complete-cycle oil refinery. So, there is something to talk about.

Taneko LLC is in charge of construction works, though it is a state-run company. Our situation is unique because we are a private company. In fact, there are no other private projects of building refineries with the capacity of seven point five million tons, the oil processing depth of 94%, and the fuel quality of Euro-5 standard. Much is said but little is done in this area.

You began with quite a small factory and soon started its modernization. What for?

A small group of enthusiasts undertook to build an oil refinery from scratch. Their purpose was simple and fully compliant with the Russian market of that time: to establish their own enterprise, gain thereby a one-hundred-dollar profit per one ton of oil and enjoy life. The idea was not different from others related to those 200 similar enterprises operating throughout the country. When it became possible we used borrowed money and bought a Petrofac unit manufactured by an American company-producer of standard low-tonnage equipment for remote regions. At that time we thought that we had bought a refinery, but it turned out to be only the beginning. The machinery occupied the area of one hectare, but the auxiliary infrastructure which was indispensable for the refinery could hardly be placed on 25 hectares. The unit and its assembly cost us USD 20 million and the rest made up a little bit more than USD 50 million. Hard time. It was our first exam which we managed to pass, though with difficulties.

Working more and more in oil business we learned its specifics and understood that our initial idea wasn’t interesting and very promising. We decided to go further, modernized the refinery, and in 2008 received the output capacity of 740 thousand tons of oil. It was almost twice as much as compared to the original project. Then in 2010 we built the second phase with the capacity of 2.5 million tons of oil products p.a., and one month ago we completed its modernization, so, the maximum capacity amounted to 4.2 million tons after the 1st of December this year.

In addition to that, we expanded the refinery’s infrastructure: we bought a railway station, built a finished product sector, laid pipelines thereto, constructed filling racks in order to promptly form a big tanker train. It enables us to save 10% of the railway tariff. And on November 30 Transneft commissioned the second pipeline laid to us with the capacity of 6 million tons per year. Now we receive oil through two pipelines simultaneously. The guarantee of uninterrupted supply cost us 1.5 billion rubles spent for the modernization of the oil pipeline and pumping stations of Transneft. Now we are not limited in respect of oil supply volumes and may achieve the capacity of 4.1 million tons, and then of 7.5 million but in a year. Far and by, we have come to like the process. We got rid of the title “mini” two years ago.

Two pipelines, of course, enhance security of the enterprise. But still it doesn’t guarantee uninterrupted supplies.

We have got our own oil but little, about some 10 million tons. We bought Tarkhovskoe oil field, which is already 36 years old, from TNK-BP two years ago precisely. As of the day of purchase oil production there was practically plummeting. The oil field is very watery – only 5% of oil is there. We spent one year to stabilize the production and now we produce 30 thousand tons per month. But this oil field meets 10% of our current demands in terms of production volumes.

Of course, it cannot be called a crude material security. It becomes possible when minimum 60% of facilities are loaded with proprietary oil. This is our objective. Now we intend to acquire a better oil field at an auction from Rosnedra (the Federal Agency for Subsoil Usage) or through intermediaries.

There exist about one hundred “frozen” oil fields, but their value is unreasonably high. We are waiting for a chance and meanwhile are practicing at our small oil field. Approximately 200 people are working there now, they gain experience in document flow administration, learn how oil wells are repaired, maintain the level of production, they understand how valuable it is...

However, they manage to avoid losses. Now it is important to us to have our own oil resource rather than to make money. And the economic indices of such resource don’t matter, they should only be positive. The ownership of oil provides for a guarantee that the enterprise won’t stop, as well as for the freedom of maneuvers on the purchasing market. It is possible to take time and buy things under more advantageous conditions due to being one of the last buyers. So, meanwhile the refinery is developing our oil producers have time to amass experience. In the coming years, I am sure, we will certainly acquire an oil field with substantial reserves.

And why do you want to have so much trouble? You say it yourself that 200 mini-refineries go on making a semi-product from oil and enjoy life.

We, too, wanted to earn easily as all the rest of small businesses did. But one day we realized the scale of approaching market changes and began to catch up with the departing train with all our might. Now we are standing on the step-board of the last railcar. If we have enough strength to keep our balance when the train gathers speed, we will be able to enter the railcar. If not, our production will stop as is the case with all small businesses, though our refining capacity is already great. If we manage to withstand we will become an illustrative example of the fact that a private company can make progress in the oil industry.

The matter is that a system is developing in the oil sector in which only extremely modernized deep refining enterprises capable to compete on all high-quality product markets using purely economic methods will survive. It will become senseless to quarrel, make arrangements with governors, send letters to top echelons of power. As from July next year special blocking excise will be introduced for all low quality oil products which will grow and by 2015 it will make up 7,700.00 rubles per one ton, i.e. the equivalent of some USD 250. Naturally, none of the enterprises engaged in primary processing only will survive any longer.

All in all, order is being imposed in the industry at last. Perhaps, primitive technologies can be applied in a separate area where there is local oil which is refined for specific use in that area. To run such oil refineries on the rest of the territory is an unjustified wastefulness. Actually, now the country is selling slightly modified crude materials. Russian oil product range shall consist of such high quality products which in the aggregate after being sold shall yield more income to all the persons engaged in the process (to the state, first and foremost) than the equivalent of crude oil.

Today, especially after the promulgation of new rules on connecting to pipelines and the functioning of oil refineries, the stage-by-stage introduction of quality regulations until 2016, and the recent quadripartite agreement, to which we are also a party, made by and between 30 major oil refineries and Rostekhnadzor, Federal Antitrust Service and Federal Tariff Service, all these innovations make the pricing mechanism clear. I hope that in 2015 by the date when all new regulations become effective we will complete the construction of deep refining workshops. Now that we are carrying out construction works new regulations, of course, create certain difficulties for us, but changes are inevitable and necessary.

How will the oil refinery look like after the third phase commissioning?

The third work flow phase consists of deep refining and hydrotreating workshops in which high quality of products will be attained. We were drawing up this project for a long time, one year and a half. According to the project next year we will swell the refining capacity up to 7.5 million tons, and in 2014 we will start hydrotreating and begin the production of Euro-5 diesel fuel.

In parallel we are building a carbonization workshop. It is quite a complex structure from which fractions of naphtha and diesel return to final treatment whereas fractions of gasoil and coke are left. And only in this case we will make a finished product in all respects.

What markets are you supplying your products to? And what changes are expected after you begin working at full capacity?

At first we focused on the Tyumen Region. Today the refining volume already exceeds regional demands. After applying Euro-5 quality standard five hundred thousand tons of gasoline will be used in the Tyumen and adjacent areas, including in the Khanty-Mansi and Yamal-Nenets districts, plus one and a half million tons of diesel with the freezing point up to minus 45 degrees, and coke will also be used on the territory of our region. So, we will export 5 million tons accounting for two thirds of our production.

In addition to that, Euro-5 oil products will be supplied to our filling stations. We own already 20 filling stations in Tyumen. We haven’t made any rebranding yet. The filling stations are not unprofitable, though it is not easy to achieve it. The matter is that they buy gasoline and diesel from other oil refineries at market prices and extra charge is extremely small. As soon as we have our own high quality product their profitability will skyrocket.

At the end of 2015, or no later than in the very beginning of 2016, we are to put our enterprise in operation at complete cycle. Then the refinery’s profitability will be provided in any case, even is refiners will find themselves under the most severe conditions. But it will take place in three years. Subsequently it will be possible to think about further development but not the main thing is to functionally complete the enterprise and to forget nothing.

Large Oil Refinery From Private Company

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