Oil refining

The Company’s strategic goals in the refining sector are: raising annual refining in Russia to 38-40 mn t; increasing annual petroleum refining capacity in Europe to 25-30 mn t; making products that meet the Russian Government’s Technical Regulations for fuel quality (Classes 4 and 5); achieving refining depth of 90-95%, and raising the share of light petroleum product output to 77%. Company refineries must also achieve international technology standards, including standards that regulate environmental protection and safety.

Since 2009, the Company has had a program to upgrade and retrofit refining capacity and to build new units. The Omsk Refinery and Yaroslavneftåorgsintez (YaNOS) retrofitted hydrotreatment units for diesel fuel, and in 2010 YaNOS built a new unit for primary refining of crude oil. The Omsk Refinery has also built Russia’s largest isomerization plant instead of the previous one: Isomalk-2. And the Moscow Refinery began retrofitting activities in 2010.

A large-scale upgrade program is now underway at the Omsk, Moscow and Yaroslavl Refineries. The program is designed to improve environmental characteristics of fuels, achieve much deeper refining, and to expand the volume and range of products (high-octane gasoline, diesel fuels, aromatic hydrocarbons, coke, modern bituminous materials and petrochemical products).

In 2011, the Omsk Refinery concluded the first stage of retrofitting of a KT-1/1 catalytic cracking complex. The project will increase production of automotive gasoline and ensure deeper refining of crude oil. Work on new hydrotreatment equipment for catalytic cracking gasoline and diesel fuel also continued, and design work was carried out for a project to build deep refining facilities. Production of bituminous polymer materials was launched at the Omsk Refinery in the reporting year.

Projects in hand at the Moscow Refinery in 2011 included construction of an isomerization unit and equipment for hydrotreatment of catalytic cracking gasoline, as well as retrofitting of the hydrotreatment unit for diesel fuel.

JSC Slavneft-YaNOS completed construction of isomerization and hydrotreatment units for catalytic cracking gasoline. The projects will increase output of high-octane gasoline in a manner that complies with the Technical Regulations.

Gazprom Neft remained among Russia’s leaders as measured by rates of growth of crude oil refining volumes in 2011. The Company increased refining volumes by 6.8% in the reporting year, from 37.9 to 40.5 mn t of oil.

Growth of refining volumes was mainly due to reduction of volumes of external oil refining at the Moscow Refinery.

The Company’s chief refining assets are Omsk Refinery and Moscow Refinery (share in refining — 100%).

In 2011, the Company continued to successfully address two interrelated objectives: increasing refining efficiency and improving the quality of petroleum products.

Anatoly Cherner
Deputy CEO Logistics, refining and sales

Omsk Refinery. The Omsk Refinery is one of the most up-to-date oil refineries in Russia, and one of the world’s largest with annual installed capacity 21.07 mn t of crude oil. The refinery retained its leadership in Russia in 2011 as measured by output of light petroleum products and aromatic hydrocarbons. Crude oil refining at Omsk in 2011 totaled 19.949 mn t. Primary refining capacities were 94.7% loaded, and refining depth was 84.05%.

The plant’s main product types are automotive gasoline, diesel fuel, construction and road bitumen, boiler fuel (fuel oil), aviation jet fuel, and also a whole range of aromatic hydrocarbons, liquefied hydrocarbon gases, various lubricant oils, road bitumen, additives, catalysts and others. Light petroleum products comprise 64.2% of output.

Upgrading of equipment on the L-24/7 unit for hydrotreatment of diesel fuels facilitated a deparaffinization process so that winter diesel can be produced from summer fuel. Thanks to this technology, the plant can now make more than 32,000 t of additional winter diesel fuel per month during the peak demand period.

The Omsk Refinery also implemented a number of projects in 2011 to improve industrial and environmental safety, including modernization of the nitrogen-oxygen plant, construction of a new plant for dark petroleum products, construction of a complex for bitumen and coke production, as well as facilities to produce liquefied hydrocarbon gas, sulfuric acid and alkali, and retrofitting of a drainage system for treatment facilities. The Refinery’s G-43-6 unit was adapted to make biceolyte catalysts for catalytic cracking: these components are used to manufacture high-octane gasoline in environmental classes 4 and 5. At present, the Omsk Refinery is Russia’s only producer of catalysts for catalytic cracking.

The Omsk Refinery was a prizewinner once again in 2011 in the ‘Russia’s 100 Best Products’ competition, winning diplomas for its Premium Euro-95 automotive gasoline, high-purity petroleum paraxylene and orthoxylene. There were also winning products from Omsk in the category ‘Products for Industrial Manufacturing’, namely catalytic gas oil, aviation jet fuel and Regular Euro-92 unleaded automotive gasoline.

Moscow Refinery. The Moscow Refinery is a leader in production of high-octane gasoline and diesel fuels, and covers about 40% of the petroleum products needs of the city of Moscow and the surrounding Region.

The refinery’s main products are automotive fuel, diesel fuel, rocket oil, liquefied hydrocarbon gas and road bitumen. Light petroleum products comprise 56.5% of output.

The Moscow Refinery’s installed annual capacity is 12.15 mn t of crude oil. Refining volumes in 2011 were 10.8 mn t, 21% more than in 2010.

Primary refining capacity at the Moscow Refinery was 88.9% loaded in 2011. Refining depth was 72.28% and irretrievable losses during refining were reduced to 0.74% in the reporting year.

The refinery has switched to a two-year maintenance cycle, so that 2011 was comparable with 2009 in terms of the amount of time production equipment was in use. The refinery overhauled units that are part of its ‘smaller production circle’ in November and December 2011.

Output of light petroleum products was 56.6% of total output, or 6.114 mn t in the reporting year. The Refinery produced 2.368 mn t of gasoline, including 2.201 mn t of high-octane AI-95 and AI-92 fuel. The share of high-octane brands in automotive gasoline output increased compared with 2009 by 4.4% to 93.0%. Other outputs in 2011 were 2.672 mn t of diesel fuel, 649,000 of jet fuel, 960,000 t of bitumen, and 2.837 mn t of marketable fuel oil.

In 2011, the Moscow Refinery launched production of Class 4 motor fuel and diesel fuel having upgraded the existing equipment. Construction is underway on this site of a facility for isomerization of the light gasoline fraction Penex and a naphta hydroformer by catalytic cracking. When this facility is commissioned in 2013, all the motor fuel produced by the refinery will comply with Class 4 and Class 5. Transition of production to compliance with standards of class 5 will be two-step. At the moment diesel fuel of Class 4 only is supplied to the Moscow market. In 2012 upon reconstruction of the operating diesel hydrotreating unit, 50% of diesel fuel will be produced to Class 5 standard. And upon construction of a new diesel hydroforming unit in 2014, all Moscow Refinery diesel fuel will comply with Class 5.

The Moscow Refinery was integrated into Gazprom Neft Group during 2011. Non-core industrial processes were outsourced in 2011, which considerably reduced the costs of oil refining and helped the business to focus on key projects.

The refinery is now implementing the first stage of a retrofit and upgrade program, which will raise product quality. The program should last until the end of 2020.

The plant sells most of its products on markets in Moscow and the Moscow Region.

Slavneft-YaNOS JSC Slavneft-Yaroslavneftå-orgsintez (Slavneft-YaNOS) is a producer of fuel and lubricants with a deep oil refining system (installed annual capacity is 15.2 mn t). YaNOS ranks fifth among Russian refineries by primary refining volume and makes a wide range of petroleum products, from high-octane gasoline to high-quality bitumen (more than 100 items in total). Refining depth in 2011 was 65.6%, and light petroleum products were 56.4% of output. YaNOS’s customers include most major corporations in Russia’s central and northwestern regions, as well as airports, the Northern Railway Company and the armed forces.

As a shareholder of JSC Slavneft Oil Company, Gazprom Neft has proportionate access to the refining capacity of JSC YaNOS. In 2011, primary refining by YaNOS was 14.774 mn t, and the Gazprom Neft share was 7.387 mn t (50%).

Like other Gazprom Neft refineries, YaNOS has launched a production upgrade program to raise the quality of its petroleum products to Euro 4 and Euro 5 standards and to achieve greater refining depth.

The Refinery has commissioned a hydrotreatment facility for catalytic cracking gasoline with an annual capacity of 800,000 t. The facility reduces sulfur content in gasoline while preserving its high octane number. The cost of the project was RUB 5.22 bn and it represents a stage in the program to upgrade and retrofit Slavneft-YaNOS. The refinery also completed construction of Isomalk-2 — an isomerization plant for Ñ5-Ñ6 gasoline fractions — during 2011. Once commissioned, the plant will raise output of high-octane gasoline from 2.086 mn t in 2011 to 2.48 mn t in 2012.

Starting from January 1, 2012, all automotive gasoline made by YaNOS complies with the environmental standards of Euro 4 or higher.

NIS. The NIS refinery complex consists of two refineries in Serbia (one in Panchevo and the other in Novi Sad), which produce a full range of petroleum products from engine gasoline and diesel fuels to machine oils and materials for the petrochemical industry.

Maximum input capacity at the two companies is 7.3 mn t of crude oil annually (up to 4.8 mn t at Panchevo and up to 2.5 mn t at Novi Sad). Average annual refining is over 2.36 mn t of crude oil.

The NIS refineries make petroleum products and natural gas products, which are compliant with international quality specifications: automotive fuel, liquefied petroleum gas (vehicle fuel), BMB Premium-95 and BMB Regular-92 unleaded motor fuel, MB Premium-95 motor fuel, euro diesel fuel, D2 diesel fuel, liquefied petroleum gas, aviation fuel and lubricants etc.

In addition to sales to markets in Serbia, NIS exports motor fuels, benzene, toluene as well as road and construction bitumen to EU member states, Ukraine, Croatia, Montenegro and Bosnia-Herzegovina.

The Panchevo Refinery began construction of a complex for light hydraulic cracking and hydrotreatment in 2010 as part of a program to upgrade NIS refining capacity. The complex will help the Panchevo Refinery to increase refining volumes to the maximum load of 4.8 mn t, providing sufficient output to cover the needs of the Serbian market and export fuels to other Balkan countries. Gazprom Neft is obliged to finance the NIS upgrade program, which is worth ˆ 540 mn, by the terms of an agreement with the Serbian government.

The work includes construction of a hydrogen plant, upgrade and construction of infrastructure facilities, and a number of environmental projects. Construction of the hydraulic cracking complex alone will cost ˆ 396 mn. The complex is scheduled to begin operations in the third quarter of 2012.

The two NIS refineries refined a total 2.359 mn t of crude oil in 2011 (not including commission refining for third parties), which is 17% less than the last year indicators. This decrease is attributable to planned repairs at Panchevo Refinery.

Successful implementation of Gazprom Neft’s petroleum refining and marketing strategy will enable the Company to increase its total refining to 70 mn t of oil by 2020, and maintain its current production-to-refining ratio.

The Company intends to focus on refining development priorities, which include greater efficiency in domestic refining and increase of refining capacity in Europe.

The objectives of current work by the Company to develop its refining business are as follows:

  • increase refining capacity proportionally to planned production growth;
  • increased depth of crude oil refining;
  • raise the quality of engine fuels;
  • meet market demand for petroleum products;
  • achieve technical and technological efficiency in production;
  • establish a process management system matching global standards.