Oil Refining in Russia

In 2017, refining throughput at the Company’s refineries in Russia amounted to 100.6 mmt, compared to 87.5 mmt in 2016Including Bashneft’s performance since its purchase in October 2016.. The sharp increase was due to Bashneft’s assets integration in Q4 2016 and improved market conditions. In 2017, light product yield grew by 1.8 percentage points year-on-year to 58.4%, and refining depth grew by 3.2 percentage points to 75.2%. Refinery throughput at the Company’s mini-refineries in Russia amounted to 1.9 mmt in 2017, with Nizhnevartovsk Oil Refining Association accounting for a majority 1.5 mmt of the oil refined.

In 2017, the Company’s oil refining activities were focused on:

  • meeting market demand for quality petroleum products through ongoing refinery maintenance and upgrade programs
  • developing and implementing effective projects in refinery debottlenecking and bitumen production development
  • improving operational performance and driving operating cost down.

Going forward into 2018 and through to 2020, the Company aims to bolster the segment’s resilience to tax and macroeconomic developments by prioritizing projects at near completion, as well as high-impact and fast-payback projects, including:

  • debottlenecking and operational efficiency improvement projects
  • renovation of the Bashneft-Ufaneftekhim Refinery’s hydrocracking unit
  • the completion of the hydrocracking unit construction at the Tuapse, Achinsk, Novokuibyshevsk, and Komsomolsk Refineries, as well as the installation of catalytic cracking plants at the Kuibyshev and Syzran Refineries.

The Company’s refining strategy was updated in 2017 during development of the Rosneft‑2022 Strategy, along with the rankings within its segment investment portfolio for the prioritization and fast-tracking of its most efficient projects.

100.6 mmt refining throughput at the Company’s refineries in Russia in 2017

THE REFINERY UPGRADE PROGRAM IN RUSSIA

In 2017, Rosneft continued implementing refinery upgrade program in Russia to:

  • further improve refining depth and light product yields
  • increase clean motor fuels output, complying with requirements of the Technical Regulations of the Customs Union to meet the market demand for high-quality petroleum products
  • improve the product mix, competitive position, and profitability of the Company’s refineries in Russia

In 2017:

  • Production launch of high-purity Group III base oils, used to produce advanced synthetic and semi-synthetic lubricants at the Yaroslavl Refinery, cutting costs by utilizing own Group III base oils and expanding the range of products sold
  • Installation of the new oxidation feedstock preparation package at the bitumen production unit and launching improved bitumen production, complying with intergovernmental standards at the Ryazan Refinery
  • Installation of core large-capacity equipment for the ongoing construction of the diesel fuel hydrotreating unit at the Angarsk Refinery

Refinery Upgrade: Completion Status
  Ryazan Refinery Angarsk Refinery Novokuibyshevsk Refinery Syzran Refinery Kuibyshev Refinery Komsomolsk Refinery Effect
Crude distillation
Vacuum distillation
Isomerization
Catalytic cracking
Hydrotreating
Reforming
Alkylation
CokingDelayed coking or flexicoking.
Hydrocracking
MTBE
Tuapse Refinery Achinsk Refinery Saratov Refinery Ufa Group of Refineries Effect
Crude distillation
Vacuum distillation
Isomerization
Catalytic cracking
Hydrotreating
Reforming
Alkylation
CokingDelayed coking or flexicoking.
Hydrocracking
MTBE

The Company’s oil refining operations are focused primarily on the strategic task of supplying high-quality petroleum products to the Russian domestic market, including remote Russian regions such as Eastern Siberia and the Far East.

Some of the Company’s refineries, unlike those of most other Russian producers, are located very far from export markets, which limits the potential for boosting economic efficiency and return on capital employed in the Company’s oil refining business. Therefore, the Company continues the efforts to connect its facilities to the pipeline infrastructure, and maintains active dialogue with authorities to create sustainable tax mechanisms stimulating the development of the oil refining industry.

PETROLEUM PRODUCT QUALITY CONTROL

The motor fuels produced by Rosneft’s refineries have high performance characteristics and meet the K5 ecological class requirements outlined in the Technical Regulations of the Customs Union CU TR 013/2011 On Requirements for Motor and Aviation Gasoline, Diesel and Marine Fuels, Fuels for Jet Engines, and Fuel Oil.

Quality management systems at the Company’s refineries meet the requirements of the ISO 9000 international standards and ensure high-quality production and minimization in customer claims.

The Company’s refineries perform multi-stage Quality Control testing on its feedstock and marketable products, including on incoming feedstock, chemicals, and additives supplied to the plants, as well as multi-stage monitoring and quality control of components and marketable products throughout all stages of the production cycle, from delivery to enterprise, and to product sales.

The testing laboratories at the refineries are equipped with state-of-the art equipment, ensuring that test results are highly accurate and reliable.

Product compliance is confirmed through certifications, with the assistance of accredited testing laboratories and leading research institutes.

A project for monitoring marketable product quality giveaway gaps implemented at the Company’s refineries – it has helped to improve the efficiency of hydrocarbon processing by reducing unreasonable quality giveaway gaps.

An expansion upon the range of additives that increase the performance characteristics of motor fuels continued throughout 2017. Tests performed on the additives reduced purchase costs by increasing the number of available alternatives.

As part of the import substitution program, the Company’s refineries have completed their shift to using anti-wear additives produced by Company-owned facilities in Russia. A number of the Company’s refineries are now utilizing the Russian VES‑410D pour point depressant additive produced by the Angarsk Plant for Catalysts and Organic Synthesis.

REFINERY MAINTENANCE PROGRAM IN RUSSIA

In the reporting year, the Company continued to pursue projects rectifying violations and complying with instructions issued by the regulatory authorities by replacing worn-out equipment and implementing the following target programs at the Company’s refineries in Russia:

  • Preparation and approval of a program to comply with instructions issued by the Federal Environmental, Industrial, and Nuclear Supervision Service of Russia (Rostechnadzor), following inspections of the Bashneft-Ufaneftekhim branch in 2016–2017
  • One of the world’s largest biological wastewater treatment plants at the Bashneft-Ufaneftekhim Refinery was renovated, an addition to the framework within the Year of the Environment 2017 action plan approved by Decree of the Government of the Russian Federation No. 1082r dated 2 June 2016
  • Successful construction of a central laboratory at the Kuibyshev Refinery
  • Implementation of a pilot project to develop an automated process control system for the oil treatment unit (OTU-2) in shop No.2, using Rosatom equipment

IMPORT SUBSTITUTION, DEVELOPMENT AND LAUNCH OF NEW PRODUCTS, AND PRODUCT APPROVAL PROCESSES

  • As part of the import substitution program, the Company’s refineries continued their shift to using anti-wear additives produced by Company-owned facilities in Russia
  • Production launch of RT jet fuel at the Novokuibyshevsk Refinery and TS-1 jet fuel at the Ryazan Refinery using alternative anti-wear additives, as well as the launch of improved motor fuels at the Komsomolsk and Achinsk Refineries
  • To ensure the timely delivery of fuel under the state defense order, the Company obtained approvals for the use of improved motor fuels made at the Angarsk, Achinsk, Novokuibyshevsk, Bashneft-Ufaneftekhim, and Ryazan Refineries for weaponry, military equipment, and special equipment

In 2017, Rosneft successfully ensured through a set of initiatives that its key export products comply with international technical regulations (REACH, CLP, GHS), developing 24 Safety Data Sheets in accordance with international standards.

IMPROVED OPERATIONAL PERFORMANCE OF REFINERIES

Rosneft consistently improves the operational performance across the Group’s refining assets.

In 2017, the Company:

  • optimized hydrotreating unit operations to allow the use of a wider variety of feedstocks and the utilization of refined gas oil to increase diesel fuel output
  • implemented scheduled and supplementary measures under the Operational Efficiency Improvement Program to obtain an economic benefit of RUB 22.6 bln

Continued operational excellence initiatives and made optimization decisions to improved performance across key Solomon Index indicators:

  • Exploitation readiness of 92.8% – 0.1% above target
  • Energy intensity index grew by 2.9 points to 124.8

In 2017, the Company implemented the previously approved Oil Refining and Petrochemicals Business Energy Savings Directive. The actual effect was 534.5 tce, exceeding the targeted 503.5 tce.

Main Areas of Focus and Activities for the Operational Efficiency Improvement Program in 2017
Focus Activities
Capacity and product yield optimization
  • Overhaul of refineries’ product utilization schemes
  • Refitting of product shipment systems
  • Optimizing oil and petroleum product loading/unloading rack operations
  • Implementation of optimized process control systems at refineries
Energy consumption reduction
  • Overhauling steam and heat exchanger networks at facilities
  • Improving the efficiency of waste heat boilers
  • Improving furnace efficiency
  • Improving the efficiency of heat exchangers
Reliability and mechanical availability
  • Optimizing overhauls of refinery facilities and processing operation times without workload reduction
  • Procedures extending the functional operation times between refinery facility repairs
  • Optimizing repairs and turnaround schedules following assessments of equipment condition
Reduction in oil and petroleum product losses
  • Increasing hydrogen-rich gas refined by PSA-unit 2
  • Reducing raw APG flaring
  • Equipping petroleum product tanks with floating roofs
REDISTRIBUTION OF COMPONENT FLOWS BETWEEN THE GROUP’S REFINERIES

In 2017, Rosneft continued the successful redistribution of component flows between the Group’s refineries.

  • MTBE produced at the Kuibyshev Refinery RUB 24.3 bln in 2017.
  • Processing of the butane-butylene fraction produced at the Kuibyshev Refinery was launched at Bashneft’s refineries, and Rosneft’s refineries began processing gasoline components produced at the Integrated Refining Complex in Ufa, as part of the ongoing process to integrate Bashneft’s refining assets with the Company’s unified plant production chain. This allowed a redistribution of loads between units at the refineries and an increased fuel output
  • Bashneft’s refineries began full-scale use of anti-wear additives for diesel fuels and a partial use of pour point depressant additives produced by Rosneft’s plants

The successful initiatives enabled an improved performance across the Company’s plants while reducing operating costs.