New refineries to be built in the Far East

Two projects for the construction of new oil refining facilities are under development in the Far East. One of them is on Sakhalin, Gazprom is engaged in its preparation. The project is undergoing the Investment Justification procedure (OBIN). The Ministry of Investment, Industry and External Relations of the Sakhalin Region told Izvestia about this.

Backup option: the authorities are preparing a new tax maneuver for the oil industry

What kind of concessions are we talking about and how will this affect related areas?

Gazprom did not respond to the editorial's request, however, it was previously reported that the justification for investments in the refinery with a capacity of 4.5 million tons of petroleum products per year was planned to be prepared by March 1, 2023. It was assumed that Gazprom would make a decision on the fate of the project based on this document.

In addition, at the end of May, the Russian Railways Partner magazine, citing the Minister of Energy of the Khabarovsk Territory, German Tyutyukov, reported on the construction by NOC of the second stage of the Khabarovsk refinery with a capacity of up to 10 million tons.

"At the moment, the issue of building the second stage of the plant is in serious discussion with colleagues, with NOC. In fact, this is a new plant of the group with a capacity of up to 10 million tons per year. The existing plant currently has a capacity of up to 5 million tons," the minister said.

He confirmed this information to Izvestia. According to him, "the project is under development.

"We can return to this issue in the fall," German Tyutyukov told Izvestia.

The idea of creating these capacities is quite natural, since the Far East is experiencing a serious shortage of petroleum products — with consumption of about 6 million tons per year, its own production is about 4 million tons. That is, about 2 million tons per year have to be imported from Siberia and Central Russia, said Valery Andrianov, associate professor at the Financial University under the Government of the Russian Federation.

"The development of oil and gas processing facilities in the Far East can make it possible to provide the region with high—quality fuel, reduce logistical costs when transporting fuel to consumers, and ensure the export of value-added products by replacing the export of raw materials," said Tamara Safonova, CEO of the independent analytical agency NAANS-MEDIA.

However, in her opinion, in conditions of high interest rates, the payback period for projects increases dramatically, and in the absence of government subsidies, in particular, in the form of an investment component, the profitability of the project may be in a negative zone.

Read more in the exclusive Izvestia article:

Pour more gasoline: new refineries will appear in the Far East