Rosneft Postpones Refinery Modernization Program

Rosneft’s continuous rolling back of investments in refineries over the past couple of years means the state-owned oil giant has practically delayed its refinery upgrade program from 2020 to 2027, Kommersant business daily reported.

Other Russian top oil firms, such as Lukoil, Gazprom Neft, Gazprom, and Surgutneftegaz, have almost reached their targets, whereas Rosneft has only met its obligations halfway on modernizing refineries within four-way agreements between the government and oil producers clinched back in 2011.

By 2020, the company, which owns 13 large refineries, and controls 36% of the country’s primary crude oil processing, should have constructed 42 process units at its plants, though it has only finished 20 so far, and abandoned plans on building two of them, the paper says. According to the data provided by the Energy Ministry, the remaining 20 units are planned to be built until 2027.

Rosneft has denied the newspaper’s information.

“The information on the company rescheduling its refineries’ modernization program for up to seven years is utterly inaccurate,” Rosneft’s representative told Kommersant, adding that it is “implementing the modernization program in accordance with the approved business plan and operation schedule.” He did not specify when the upgrade is going to be completed.

Meanwhile, a source in the Energy Ministry told the paper “the rates of investment in modernization have slowed down due to changes in the macroeconomic, tax and price conditions.”

There is no “understanding of the long-term system of tax and customs regulation” in the sector, while investment profitability is low, the source said, adding though that the government is discussing measures to support refining.

Market watchers view the rescheduling as an expected move since it looks more profitable to export crude oil, rather than invest in refining now. Vasily Tanurkov, an expert at the Analytical Credit Rating Agency (ACRA), says Rosneft will need an additional $6.4 billion to complete its modernization program.