November 2, 2012
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№ 10 (October 2012)

Interview with the lead technologist of the “All-Union Oil Refining R&D Institute” – Vladimir Bulatnikov

By Elena Zhuk

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OIL&GAS EURASIA: Vladimir Valentinovich, can you please explain the difficulties of transferring to the new regulations?

Vladimir Bulatnikov:
Within the framework of the Customs Association of Russia, Belorussia and Kazakhstan, there was a decision to transfer to unified regulations which is going to come into force since the next year. Unfortunately, for the last twenty years we have considerably disbanded with the Belorussians and Kazakhs; that is why we were unable to set up unified terms of transfer from one class to another. But what are the different terms of transfer without a customs frontier? For example, the goods are freely transferred through the frontier from Kazakhstan to Russia and vice versa. Yet, you can’t put a trade stamp or a seal to a portion of gasoline.

OGE: But what are the differences in the development of petroleum refining?

Bulatnikov: In Kazakhstan, in particular, petroleum refining lags behind very strongly. At the Atyrau refinery, nearly 70% of gasoline is А76; at the Shymkent refinery, nearly a half of gasoline is the A76. That is, if you simply ride through the streets of Moscow, perhaps, you won’t find any filling stations with the A80 gasoline, though its production at us is still permitted. Why? There is no demand. The vehicle fleet which consumes such gasoline has been pensioned off. These are old cars GAZ-53, ZIL-130. They are not manufactured any more, and those that were manufactured have worked out their resource.

OGE:
So, we can say that in Kazakhstan, the vehicle fleet is very old?

Bulatnikov:
Yeah, that’s so. On the other hand, Belarus has progressed much further in quality. There are two plants, both of which are very well-renovated. But they have got other problems: the capacity of these plants far exceeds the needs of the country. Belarus can produce about 30 million tons of capacity, and they need maximum 6 million tons.

OGE: So, what do they do with the rest production?

Bulatnikov: Since last year, petroleum is sold to them at a discounted price of oil only for their needs, which makes 6.5 million tons. As for the rest, they pay to our oil companies an additional premium, and this award demolishes the entire margin which they could cash in on re-export.

Now, when the customs border has been removed, gasoline goes to Russia. Belarus also supplies petroleum products to Ukraine, where today, in fact, only one plant is working in Kremenchug and some small factories in the west. In summary, we now have quite diverse requirements in the framework of the Customs Union, and such situation will go on, I think, until 2016, when we are going to become more or less equal in our level.

OGE: Let us please clarify what share of the Russian vehicle fleet consists of old cars?

Bulatnikov: We lag behind Europe for about 5-6 years, and will continue to lag even more. About half of our vehicle fleet is in the age of more than ten years. These are mainly cars of domestic production, Euro 0 or Euro minus; basically, Ladas. This is a social issue. These are cars for very poor people in province, and people can’t replace them for financial reasons.
 
OGE: What are the positive features of such transition?

Bulatnikov:
Our automobile industry has made a tremendous spurt, introduced more than 1.5 million facilities for cars assemblage. Kaluga has become a second Detroit, St. Petersburg is also not lagging behind. We have practically everything here: Ford, Toyota, Volkswagen and Renault… And, of course, these cars require modern gasoline, or they simply won’t work. So, first of all, we need to produce good gasoline. Government, using the regulations, has “pressed” the oil companies very strongly. The result amounted to 189 billion rubles capital investment in petroleum refinery over the past three years. That’s a tremendous amount, and moreover, it also pulls forward machine engineering. Although the equipment is mostly purchased abroad, orders for pipes, valves, pumps, construction steel are a load for domestic industry. Therefore, nowadays our chemical engineering plant “Uralkhimmash” and plants in Penza, Dzerzhinsk, Irkutsk have got enough orders both for the current year and the next year. That is, certain capital expenditures have pulled forward other industries – engineering, construction and so on. So, I think that it is very positive: on the one hand, the growth of modern cars assemblage, on the other hand – modernization of the plants. Unfortunately, the plants have been upgraded irregularly. For example, Lukoil is already transferring to the Euro 5 class. Ufa refineries owned by “Bashneft” are also upgraded swiftly, because there was a lot of money invested in modernization. Yet, our Moscow factory Kapotnya (Owned by “Gazprom Neft”) is, I think, in poor condition, it is worn-out. In the Samara group of refineries owned by “Rosneft”, the situation is also far from ideal.
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OGE: So these plants are likely to fail to comply with the terms of modernization?

Bulatnikov: The possibility of the fact that these plants will fail to comply with the terms of modernization, is very high. By the way, the condition of the Orsk plant (owned by “RussNeft”) also leaves much to be desired.

OGE: Probably, this can be connected with scales of production? “Rosneft” has got so many plants.

Bulatnikov: “Lukoil” has got just slightly less refineries: for example, large plants in Perm, Volgograd. But “Lukoil” has invested in refining. “Bashneft”, too, showed itself being far-sighted. “Rosneft”, on the contrary, considered that the main point was selling petroleum abroad; in the meantime, its plants are not very new, especially Samara group, where there are post-war factories. Therefore, we have got such results.

OGE: Which technologies is the transition based on?

Bulatnikov:
Our main high-octane component has previously been the product of re-forming, when we produced aromatics: benzene, xylene, toluene – out of wax. Aromatics is also high-octane, but since the benzene ring is a very rigid structure, it burns slowly. In modern Western engines, it won’t burn down fully. Hence we obtain benzopyrene and other emissions into the atmosphere. Therefore, the first task is to lower down benzene concentration to no more than one 1%, and also lower aromatics concentration. There are successful projects of converting re-forming units to isomerization units. Russia already has eight isomerization units, seven of them are made for reconstruction when reforming units are remodeled for isomerization.

OGE: At which refineries?

Bulatnikov:
Lukoil refineries, for example, have gone down this path. But what’s so good in re-forming? In addition to the aromatics, it also gives out hydrogen, and it is needed for desulfurization. During transition from re-forming to isomerization, hydrogen is not formed and, therefore, it is necessary to think about how to replace it. Another plant is needed for production of hydrogen. Therefore reconstruction is connected with additional problems. And I have serious doubts that “Rosneft” plants in Samara will be able since new year to give up class 2, because they may not have enough capacity to replace high-octane components.

OGE: Can you think of examples of model Russian refineries?

Bulatnikov: In my opinion, these are Perm refinery owned by “Lukoil”; Kstovsky refinery in Nizhny Novgorod, Ufa refineries owned by “Bashneft”, Yaroslavl refinery. We have about half of the industry represented by quite decent plants of class 4 with a tendency for class 5.

OGE: That is, they will, more or less, be able to comply with the terms of transition to the new standards?

Bulatnikov: Yes, but this process is uneven. For example, the “Gazprom Neft”, which owns the Yaroslavl refinery jointly with TNK-BP, has got good situation, while the Moscow refinery stays behind. In “Surgutneftegaz”, there is a good position for gasoline, worse – for desulfurization, and it lacks capacity. Though, I think, it will catch up.

OGE: Where do you think is the most pressing need in gasoline of higher environmental standards in Russia?

Bulatnikov:
They say: “Whoo, big deal, Siberia’s territory is so huge, no Euro-5 is necessary there.” For example, take Yakutia. You shout out from one village, and they won’t hear you in the next one. But in winter, the environmental condition is worse than in Moscow. Imagine biting frost, no wind, and all the exhaust remains there, smog hanging in the air. So under no conditions will Siberians say that they do not need Euro-5. Or take Kuzbass, or South Yakutiya, where there is quarry extraction of ore or coal. It is an enormous crater, windproof bowl, which is full of exhaust gas from trucks. Therefore, this approach, when Moscow needs Euro 5, and the villagers will live without it – will not work.

OGE: Why does counterfeit remain such a big problem?

Bulatnikov: We have up to a third of counterfeit gasoline at the pumping stations, and there’s nothing you can do about it. Because we have the Law about excluded persons, FL #294. It says: “Routine check may be performed no more than once in three years.” Moreover, it is performed only in the case if the check plan is beforehand posted on the General Procurator’s Office website. Unplanned checks are only possible “with the agreement of the place of action.” Let's say you have filled the car, and after a hundred miles it has “stood up.” You file a complaint with the Procurator’s office, and they are looking for a Procurator there to get approval for the test. In the most accelerated pace, and provided that the Procurator will be set well, it takes three days, no less. But two days later there will be no sign of this gasoline at this pumping station.
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