№1 January 2012Table of contents Issue Archive
№1 January 2012Table of contents Issue Archive
№ 9 (September 2009)
Technological inferiority of the Russian oil refining sector compared to that of developed Western states is not a novelty and cannot be explained only by the withering “perestroika” of the 1990s.
This inferiority was established as early as Soviet times, when the refiners, using their traditional means, tried unsuccessfully to catch up with the United States. As for deeper oil conversion, its development in Soviet times was restrained by the necessity to produce large amounts of heating oil. Besides, oil prices were low at that time, which rendered deeper conversion facilities irrelevant.
The integral deeper conversion development program appeared in this country only in early 1980s. At that time the United States, which was experiencing a significant increase in oil prices, conducted technical upgrading of the national refining industry, achieving the processing depth of 95 percent. It was the government which played the decisive role in this renovation, by means of legal barriers and benefits pushing oil companies to construct new refineries and modernize older ones. Nearly $50 billion was invested into the U.S. refining industry upgrade program. Close availability of cheaper yet heavier, more sour Mexican oil represented an additional incentive for that process.
The price gap between Mexican and Arab crude oils was $4-5, enough to justify investments in refining, but the government's position was the main factor.
“That is just what I’ve said at the Kirishi meeting”, Vladimir Kapustin, General Director of VNIPIneft and Head of the Oil Refining Technologies Faculty of Gubkin Oil and Gas Russian State University, recently told OGE. “Unless the state intervenes, oil companies will not direct significant investments into technical upgrading of the existing refineries and construction of new up-to-date facilities.”
Companies budget for these project on leftovers, since investments into this industry are measured by billions of dollars, and the pay-back period comes to 5-7 years. Crude oil production and transport ensures much more quickies. In 1990s, inferiority of the domestic refining industry was only increasing. Currently, the processing depth of Russia’s refining industry averages 72 percent, compared to the U.S. 95.5 percent, Western Europe’s 85-90 percent, and China’s approximating 85 percent. With regard to refining volumes, Russia comes the fourth in the world, but with regard to refining quality based on the Nelson Complexity Index, it holds only only 67th place.
Most Russian refineries are “oil cookers” by essence, that is, they recover just the amount of oil products available in crude. With light and high-gravity oil, the processing depth of 67 percent may be easily achieved. But when it comes to heavy sour crude, light fractions contained make up 43 percent. Complex deeper conversion processes are required here. But, as it is commonly known, crude oil does not improve with the course of time, as well as processing depth. Mini-refineries do not turn the processing depth situation to the better, with their maximal processing depth of 50 percent. Mini-processing facilities are not equipped with deeper conversion units, which in this case are doomed to be unprofitable.
At the meeting centered on the problems of fuel and energy complex, Prime Minister Vladimir Putin announced that introduction of the Fuel Quality Technical Regulations, requiring switch to Euro4 and Euro5, would not be postponed any more. However, according to different assessments, technical upgrading of the industry will require $30 to 50 billion. It is not clear for now who will finance this program, since the government has no intention to appropriate any resources. Being captured by the “oil curse”, the first concern of the government is not to allow oil production to drop. That is why, while the concern about the situation in the refining industry is high, until now there have not been developed any efficient measure aimed at solving this problem in the nearest future.
Yelena Chernysheva, Deputy Head of the Oil Refining Technologies Faculty of Gubkin Oil and Gas Russian State University, shared with OGE its vision of problems and prospects of the domestic refining industry, including the issues of training young specialists for the industry.
OGE: What is the position of oil refining in the oil and gas industries of the developed countries?
Chernysheva: The most important one. Let’s take, for example, the United States, which produce as much as 330 million tons of oil per year and process about 850 million tons per year, so, they process significantly more amounts than they produce. And about 600 million tons of oil is bought abroad annually for further processing. In addition, the USA buy finished oil products to meet their own demand.
The tendency currently observed in Western Europe is different. Western Europe has slightly reduced refining of crude oil at its own refineries, preferring to import finished high-quality and cheaper oil products from India and other Asia-Pacific countries. This may lead to the following consequences. First, Russia, which exports oil mainly to Western Europe, may lose the reliable sale market. And second, the Arab Middle East countries, which formerly had three or four own refineries meeting their own needs and mainly sold crude oil to the whole world, found competitors in the countries developing production in Africa and Latin America. The Arab countries quickly reacted to the situation, making large investments into construction of oil refineries with petrochemical elements. After a while, this region may be expected to deliver just an avalanche of high-quality oil products to Europe.
Given that this region produces sweet light oils which will be processed at the state-to-the-art equipment under the most advanced technologies, it is evident that oil products of the region will be of the highest quality. All this must give our country a drive to accelerate upgrading of the oil refining industry.
OGE: Besides, the RF Government’s approval of the Technical Regulations “On Requirements to Motor and Aviation Gasoline, Diesel and Marine Fuels, Jet Fuel and Fuel Oil” must also have some positive effect, mustn’t it?
Chernysheva: Of course. The government made it clear to oil companies that the requirements would get stricter. The companies should redistribute funds between production and processing. Today producing companies received much incentives and they may find resources to develop processing. At present, much work should be done to devise by-laws, standards and provisions ensuring the implementation of these regulations. Given the crisis, these requirements may be difficult to meet. But, generally, it is a positive decision.
OGE: What practical steps have been taken recently to improve domestic refining industry?
Chernysheva: Many domestic refineries have been recently fitted with new equipment and upgraded. First to mention is LUKOIL’s Perm Refinery, which introduced the U.S. Texaco technology – the T-Star process. This technology implies crude hydrocracking in a three-stage boiling (ebullated) catalyst bed. The process includes the catalyst regeneration system enabling to maintain the high level of catalyst activity. In the course of this process, the catalyst may be removed and added, as needed.
Yaroslavnefteorgsintez should also be mentioned here. It has a modern hydrocracking plant and a new catalytic cracking plant, which ensures production of oil products complying with the Euro4 standards. This refinery’s products, as well as those of Perm refinery, are exported.
The upgrading process has started at the Volgograd refinery (Lukoil), a new isomerization unit has been built, upgrading of coking units is planned.
LUKOIL-Nizhegorodnefteorgsintez plans to install vacuum gasoil hydrotreating and hydrofluoric (HF) alkylation units, as well as – and what’s most important – a catalytic cracking unit that will help to significantly increase the refinery’s processing depth as well as the quality of oil products.
Moscow refinery plans the multi-stage upgrading to be implemented in three stages. The upgrading process covers the construction of new plants to increase processing depth. These include a hydrocracking unit. The upgrading of Moscow refinery will be supplemented with a special program to mitigate the facility’s harmful environmental effect and to reduce the sanitary protection zone near the refinery. Significant funds are to be invested into environmental improvement of territories improvement surrounding Moscow refinery.
Currently, the upgrading of Surgutneftegaz-owned Kirishi refinery is on fast-forward. According to the plan, a deeper oil conversion plant – possible to say, a “plant-inside-the-plant”, with hydrocracking, visbreaking and catalytic cracking units., should be built. Kirishi refinery is located in Leningrad region that makes it easier to export its products to European markets.
The Gazpromneft-owned Omsk refinery is undergoing major restructuring. Rosneft also plans to upgrade its Komsomolsk and Tuapse refineries.
Under the project which envisages the upgrading of Tuapse refinery, a virtually new facility with annual throughput of 12 million tons of oil should be constructed. Definietely, this project requires major investments. The global financial crisis may further complicate implementation of the project. Insufficiency of free land available for construction presents additional problems.
OGE: In your opinion, why local scientists and engineers offer so few competitive technologies and equipment for the refining industry?
Chernysheva: Of course, there are exist some processes and technologies of very high quality. And they are the world’s best. For example, UOP offers the best reforming technologies and Foster Wheeler – the best thermal processes.
Yet, Russian specialists often develop processes and technologies which are quite competitive. The biggest problem in Russia is that there is a huge gap between those who develop technologies and those who should implement them. We fall short of engineering companies which supply “turnkey” solutions, saving customers any troubles. Here technologies are developed up to the pilot stage, at best – up to the pilot testing stage. Our companies find it difficult to make a final step towards commercial introduction of a technology. For the most part, those who develop technologies are scientists. In much a lesser degree they are engineers and manufacturers. Russia badly needs engineering companies which would fill this gap. At the moment we discuss a possibility to open a major engineering center which would serve the entire industry and to create an operating company that could control a joint work of few companies in case of a large project. The same type centers may be opened using R&D institutions’ facilities, and an operating company may be created based on the facilities of VNIPIneft. When implementing large projects in Russia, Western operators mostly invite Western suppliers of technologies and equipment despite the fact that local products of the same quality are also available. For example, hydrotreating of gasoline fractions can be easily performed using domestic equipment and catalyst.
OGE: Perhaps, the State should interfere in such cases?
Chernysheva: Indeed, the State must support domestic manufacturers. It is essential to develop a mechanism enabling oil companies to make profitable investments into Russian technologies. For example, the use of imported technologies or equipment should be justified only by unavailability of local technologies or equipment of the same kind. Only in this case a foreign company may be invited as a supplier.
Of course, it does not come as a surprise that large oil companies are mostly concerned with their profits. It is the State’s job to control the industry’s development using various regulatory documents. Moreover, if only imported catalysts are used for oil refining, Russia will inevitably suffer technological dependency which may indeed be considered as a threat to national security.
To give another example, some companies scale down production of oils since it does not bring significant revenues. However, it is a strategic industry, and we cannot rely entirely on the oil products import.
OGE: So, what domestic companies still develop competitive modern technologies?
Chernysheva: A joint project of VNIINP and VNIPIneft resulted in manufacturing of a catalytic cracking unit of quite a good quality. The unit is currently installed at Taif-NK-owned refinery. The tert-amyl methyl ether (TAME) production unit was manufactured under Yarsintez technology and installed at the Moscow refinery. Russian hydrotreating and isomerization units and processes are rather competitive. New technologies and processes are offered by INKhS, VNIINP, Ufa INKhP and many others. For example, a whole line of new highly active catalysts used in hydrogenation and catalytic processes is offered by Boreskov Catalysis Institute (Siberian Branch of the Russian Academy of Sciences), KATAKhIM company, VNIINP; the Krasnodar Institute of NPP Neftekhim offers new reforming and isomerization units.