Page 4 - FSUOGM Week 02 2020

FSUOGM COMMENTARY FSUOGM
Revival unlikely for Ukrainian refining
Ukraine’s outmoded refineries shut down largely because they could not compete with imports. And Kyiv lacks the political will to invest in making them competitive
UKRAINE
WHAT:
Ukraine, a refining powerhouse in Soviet times, now only has one refinery still in operation, running at a fraction of its capacity.
WHY:
The country’s five other refineries closed between 2006 and 2013, as they were unable to compete with imports.
WHAT NEXT:
The sector is unlikely
to see a revival, as the government lacks the will to invest in updating their capacity or building new plants.
UKRAINE has never been a major oil producer. But as part of the USSR, it boasted a sizeable refining industry that not only covered domestic fuel demand but produced surplus supplies that could be exported to Europe.
Today, the situation is very different. Of the six refineries Ukraine built during the Soviet era, only one is still operating. The rest all closed between 2006 and 2013, after decades of mismanagement and under-investment left them, for the most part, unable to compete with imports. While overcoming dependence on for- eign gas has been a cornerstone of Ukrainian energy policy in recent years, the country’s heavy reliance on petroleum products from abroad has largely been overlooked.
Last one left
Ukraine’s only working refinery is located in the eastern industrial town of Kremenchug. Con- structed in the 1960s, it has a nominal through- put capacity of 18mn tonnes per year (360,000 barrels per day, bpd), although its actual process- ing capability is understood to be much lower
than this. According to Ukrainian oil pipeline operator Ukrtransnafta, the plant received 2.38mn tonnes (47,800 bpd) of crude in 2019 – a five-year record and 13.4% more than the vol- ume it took in 2018. But this is still only enough to cover less than 20% of Ukraine’s fuel demand.
The refinery’s operator is Ukrtatnafta, ini- tially a joint venture between Russia’s Tatneft and Privat Group, a large Ukrainian industrial holding controlled by oligarch Igor Kolomoysky. Tatneft was forced out of the venture during a hostile takeover in 2007, with Ukrtatnafta’s cur- rent ownership split between Privat with 56% and Ukraine’s state-owned Naftogaz with 43%. Ukraine is required to pay around $150mn to Tatneft for its complicit role in allowing Privat and Naftogaz to wrest control of the plant.
Ukrtatnafta does not disclose information on its products slate. According to its website, however, the plant can produce diesel and gas- oline compliant with the EU’s Euro-5 emissions standard. It is equipped with units for atmos- pheric distillation, vacuum distillation, catalytic cracking and reforming, aromatic reforming,
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w w w. N E W S B A S E . c o m Week 02 15•January•2020