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Russian Oil only for Russia
January 15, 2008 16:37

For the first time in the modern history of Russia the export of crude mineral oil has dropped. The production is on the contrary growing, which is the evidence of larger amount of oil processed inside of the country. It seems to be comforting at first: selling gasoline abroad instead of crude oil is much profitable. However, the Russians consume more gasoline now than it was just a few years ago, while the domestic oil companies fail to satisfy the mounting demand of the Russian market.

According to the Russian Ministry of Industry, the oil production volume increased by approximately 10 million tons in 2007, but the export remained the same. At this, the Russian oil companies and officials regularly say about upcoming shortage of fuel, which will likely result in long lines at filling stations, protests and even riots. In fact, this is the response of the oil companies to the price administration, though fixed prices make gasoline export beneficial despite high export duties. Thus, domestic oil is anyway worth processing, but the quality of the final product frequently doesn’t meet the European standards.

 Lukoil, TNK-BP and Surgutneftegaz are the only Russian companies capable of producing about 1 million tons of high quality gasoline, which is certainly not enough for export. Domestic oil corporations could probably build a new oil processing plant for export, but the size of the export duties is not fixed and makes the enterprise too risky.

Somehow, irrespective of quality, the gasoline export from Russia is growing: it increased by 30% for the last 7 months of 2007 – the expected result of price administration.

The Russian government doesn’t seem to be eager to introduce Euro-3 standard, and the oil companies in their turn don’t see it necessary to produce more fine gasoline – a vicious circle.

 The experts are confirmed that the export of fuel will be sinking, since the oil companies are likely to supply the domestic filling stations with their products, especially if take into account transportation expenses and export duties. Besides, the boom of consumer crediting led to fast growing number of cars on the roads, and all they need petrol to run. Plus, on the Russian shared market the domestic oil companies will never have to fight for consumers compared to Europe, where the competition is evident.

There is also another reason for processing oil at Russian oil plants: the growth rates of oil production are dropping, oil is gradually running out. In 2003 the oil production increased by 11%, in 2005 it went up 9%, in 2006-2007 – 2.2-2.3% only, the worst is ahead. In this situation Russian drivers can only hope for more gasoline of better quality for their cars.


Olga Pletneva

Tags: Russian oil     

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