In Russia, small oil refineries are defined as facilities with crude oil processing capacities of up to 1 million tons per year. Their main advantage lies in their compact size, relatively quick construction, and comparatively low costs. According to Yuri Stankevich, Deputy Chair of the State Duma Energy Committee, when a ready-made project and land with all necessary utilities are available, along with timely financing, the cycle for creating a modern mini-refinery typically spans from one and a half to two years. In practice, however, these timelines often extend to three to four years. The utilization of modular plant solutions can reduce installation time on-site to several months, yet the preliminary design and approval phase still takes about a year.
For Russia, mini-refineries are attractive in terms of logistics, supply reliability, and safety.
Gas does not have to be transported by rail or road over hundreds or thousands of kilometers. The local population and businesses near the refinery are not dependent on supplies from other, sometimes far-flung regions. Moreover, if a mini-refinery is damaged or goes offline, it does not pose a substantial risk to the country's overall fuel supply. Furthermore, due to the vast territory of Russia, supplying remote areas far from traditional oil refineries becomes an expensive endeavor for both producers and end consumers. This leads to rising fuel prices and inflation, ultimately affecting the region's economy, and subsequently, the entire country.
This aspect is one reason why mini-refineries are often developed in larger countries. For example, China leads in this regard, with approximately 25% of oil processed at such small facilities, often referred to as "samovars." In the U.S., mini-refineries account for 10% of the oil processed. Russia operates more mini-refineries (around 80) than the U.S. (65); however, they only process about 5% of the oil produced domestically. This discrepancy in volume classification arises from different criteria: in the U.S., plants processing up to 3.7 million tons per year are considered small, while in China, the limit is 5 million tons. Nevertheless, given that oil consumption in Russia is 5.5 times lower than in the U.S. and 4.4 times lower than in China, the difference in classification can be overlooked.
However, this does not imply that Russian entrepreneurs should rush to build mini-refineries. They are not a panacea for all problems. According to Stankevich, mini-refineries can help stabilize the market, but their impact will be limited. They can effectively address local fuel shortages, but they will not safeguard the country against global price shocks or systemic supply crises.
Additionally, there are concerns regarding small refineries from an economic, ecological, logistical, and product quality perspective. The devil, as they say, is in the details.
Dmitry Gusev, Deputy Chair of the Supervisory Board of the "Reliable Partner" Association and a member of the Expert Council for the "Gas Stations of Russia" competition, believes that the concept of distributed oil processing is correct from both energy security and fuel supply perspectives. However, numerous other factors must be considered, particularly economic ones: reducing production costs based on volume is not feasible, the sources of raw materials are unclear, pricing rules for the domestic market are uncertain, conditions for connecting to pipelines are ambiguous, and much more.
Stankevich notes that under the existing tax system, the profitability of such projects teeters on the brink of being economically viable without additional support measures. The processing cost per ton of oil at a small refinery is always higher than at a large facility due to the lack of economies of scale. The yield of light petroleum products (gasoline, diesel, jet fuel) is lower (around 45-55%) compared to modern giants (80-90%).
Small plants produce straight-run gasoline (naphtha), low-quality diesel, and fuel oil, Stankevich explains. To produce high-octane gasoline that meets the Euro-5 standard, they require complex secondary processes (catalytic reforming, isomerization), which is economically unviable at low volumes. Consequently, only large vertically integrated oil companies (VIOC) have the capacity to meet the domestic market's need for quality automotive fuels.
Managing Partner of NEFT Research, Sergey Frolov, observes that hundreds of mini-refineries currently operate in Russia, some legally and some illegally. However, nearly all of them are so-called "samovars," which only conduct primary oil processing, producing straight-run gasoline and diesel fractions, as well as fuel oil. The number of mini-refineries producing market-grade fuels can be counted on one hand. Building new high-tech mini-refineries or modernizing existing ones to the level required for producing market-grade fuel under current taxation and economic conditions is only possible with budgetary funding—there is no interest from the business sector, the expert believes.
Modern mini-refineries can be quite technologically advanced, agrees Stankevich. Ecological risks can be minimized through innovative solutions. However, constructing comprehensive deep-processing facilities demands significantly greater investments, which leads us back to questions of economics. The most significant barriers are not only technical but also administrative and financial. Without adjustments to the tax system, the mass emergence of small refineries is unlikely. A special fiscal model is essential for their viability.
As for the current issues in the fuel market, resolving them through mini-refineries—even considering their relatively quick construction timelines—is unfeasible. Their combined production capacity is too limited. According to Sergey Tereshkin, CEO of Open Oil Market, mini-refineries have never played a significant role in fuel production in Russia. Possibly, things will change if the use of straight-run gasoline for producing high-octane fuel is permitted: this measure could open the fuel market to technologically simpler refineries, the expert suggests. However, this could pose risks regarding the quality characteristics of the fuel. Overall, increasing imports—potentially supported by subsidies—may play a more crucial role in saturating the domestic market than creating additional capacities for mini-refineries. This segment is too small to significantly impact the fuel market situation.
Source: RG.RU
