In Russia, small REFs are considered to be plants with a primary crude oil processing capacity of up to 1 million tons per year. Their main advantage lies in their compactness, relatively quick construction timelines, and comparatively low costs. According to Yuri Stankevich, Deputy Chair of the State Duma Committee on Energy, when there is a ready project and a land plot with all necessary communications, along with timely funding, the cycle for creating a modern small-tonnage REF can take from one and a half to two years. In practice, however, timelines often extend to three or four years. Using modular plant solutions can reduce installation time on-site to a few months, yet the preliminary design and approval processes still take around a year.
For our country, mini-REFs are attractive in terms of logistics, supply reliability, and safety.
Gasoline does not need to be transported by rail or road over hundreds or thousands of kilometers. Local towns and enterprises near the plant do not depend on supplies from other regions, sometimes even those far away. Lastly, if such a mini-REF were to be damaged or shut down, it wouldn't create significant national issues. Furthermore, there is another argument in favor of mini-REFs in Russia. Given the country's vast territory, supplies to remote and sparsely populated areas from traditional REFs become very costly for both producers and end consumers. This inevitably leads to rising fuel prices and inflation, which impacts the economy at the regional level first, and then on a national scale.
The latter is one of the reasons why mini-REFs are most developed in larger countries. For example, China is a leader in this regard, processing about 25% of its oil at such small plants, often referred to as "samovars." In the USA, mini-REFs account for 10% of crude oil processed. In Russia, the number of operational mini-REFs (around 80) exceeds that in the USA (65), yet we process only about 5% of the oil produced in the country through them. This is, of course, a statistical nuance: in the USA, small REFs are classified as those processing up to 3.7 million tons of oil per year, while in China, the threshold is up to 5 million tons. However, considering that oil consumption in Russia is 5.5 times lower than in the USA, and 4.4 times lower than in China, the classification difference for mini-REFs can be overlooked.
Nevertheless, the above does not imply that Russian entrepreneurs should urgently embark on building mini-REFs. They will not remedy all problems. According to Stankevich, mini-REFs will help secure the market, but their role will be targeted. They can effectively alleviate local fuel shortages, but they will not protect the country from global price shocks or systemic supply crises.
Beyond this, there are economic, environmental, logistical, and product quality issues concerning small REFs. The devil, as they say, is in the details.
Dmitry Gusev, Deputy Chair of the Supervisory Board of the Reliable Partner Association and member of the Expert Council of the Russian PSA Contest, believes that the concept of distributed oil refining is correct regarding energy security and fuel supply. However, there are numerous factors that must be considered, mainly economic: it's not possible to reduce production costs based on volumes, sources of raw materials are unclear, pricing rules for the domestic market are not defined, conditions for connecting to pipelines are uncertain, and much more.
Stankevich notes that within the existing tax system, the profitability of such projects is on the verge of being unprofitable without additional support measures. The processing cost of one ton of oil at a small plant is always higher than at a large facility due to the absence of economies of scale. The yield of light petroleum products (gasoline, diesel, aviation kerosene) is lower (about 45-55% compared to 80-90% at modern giants).
Small plants produce straight-run gasoline (naphtha), low-quality diesel, and fuel oil, Stankevich explains. To produce high-octane gasoline meeting the Euro-5 standard, they require complex secondary processes (catalytic reforming, isomerization) that are economically unfeasible at low volumes. Therefore, fulfilling domestic market needs for high-quality automotive fuel is only within the capabilities of large vertically integrated oil companies (VINC).
Sergiy Frolov, managing partner of NEFT Research, observes that hundreds of mini-REFs are currently operating in Russia. Some are legal; others are illegal. However, nearly all of them are so-called "samovars" – they only perform primary oil processing, producing straight-run gasoline and diesel fractions, as well as fuel oil. The number of mini-REFs producing marketable fuel can be counted on one hand. Building new high-tech mini-REFs or upgrading existing ones to a level that allows for the production of marketable fuel in current tax and economic realities is only possible through budget funding – there is fundamentally no interest from the business sector, the expert asserts.
Modern mini-REFs can indeed be quite technological, Stankevich agrees. Environmental risks are minimized through innovative solutions. However, constructing comprehensive deep-processing complexes requires significantly larger investments, which brings us back to the economic discussion. The greatest barriers lie not so much in technical aspects as in administrative and financial realms. Without adjustments to the tax system, a mass emergence of small REFs should not be expected. They require a special fiscal model.
As for the existing problems in the fuel market, addressing them through small REFs, even with their rapid construction timeline, is unfeasible. Their collective capacity is currently too small. According to Sergey Tereshkin, General Director of Open Oil Market, mini-REFs have never played a significant role in fuel production in the Russian Federation. Things may change with the permission to use straight-run gasoline for the production of high-octane fuel: this measure may open the fuel market to technologically simpler REFs, the expert suspects. However, this would come with risks regarding fuel quality characteristics. Overall, increasing imports – including through subsidies – may play a more significant role in saturating the domestic market than creating additional opportunities for mini-REFs. This is simply too small a segment to seriously impact the situation in the fuel market.
Source: RG.RU
