2011 became the worst for the Ukrainian refining industry in its modern history
When inviting leading experts in the country to this year’s first round table, the analysts from the Psyche Center were afraid that the experts might answer in the negative. The way our state has disposed of the [oil refining] property created by several generations has been very wasteful. When mercilessly exploiting the once advanced domestic enterprises and extensive infrastructure left from Soviet times, their new owners cared little about the fact that the reserves of the national economy’s safety were not endless.
Awareness of this, of course, is gradually spreading, but we will never get back Soviet education and applied sciences, agricultural engineering, and fishing fleets, petrochemical industry and aluminum production, the pharmaceutical industry and rocket production. Does this unenviable fate also await domestic oil refining?
It is thought that importers are to blame for all of the present woes of Ukrainian oils refineries. Consequently, the only way out of this situation is to limit their activity on the domestic market. But will the introduction of safeguarding duties alone save the refineries? For some reason, there is no desire to experiment, especially since there was no problem last year when fuel imports for the first time since 2001 exceeded domestic production.
It was the state program for the development of the oil refining industry until 2010 that foresaw an increase in crude oil processing depth to 75% (calculated in keeping with Soviet standards) to bring the quality of the fuel to European standards while completely satisfying domestic demand. But since 2001 a mere quarter of the planned funds have been allocated for the implementation of the program. Instead of investing in production, owners preferred to receive dividends. The funds injected in the upgrading of all Ukrainian oil refineries in 2001-2011 were less than those invested in a single hydro cracking plant that will start working at JSC Mozyr Oil Refinery in Belarus in 2015.
Having taken full advantage of the liberal obligations related to investments and the lack of proper control by the state, the owners of the oil refineries merely maintained aging equipment in working order after the plants overcame the crisis in the 90-ies. As a result, the oil refining industry was not shifted towards the use of new technologies, the minimization of losses of raw materials, the introduction of European quality standards, and an increase in the exports light oil products. It was believed that investors (mainly from Russia) would supply the refineries with the required amounts of crude oil, but it did not happen.
With the current situation on the international markets and the mothballed technologies used by the domestic refineries, the issue of an increase in processing depth to the average level (around 86%, while it is 96% in the U.S. and Canada now, 83-88% in the European Union and 73% in Ukraine in keeping with Soviet standards) should be added to the national priorities. But although the Ukrainian Energy and Coal Industry Ministry sets Euro-5 fuel quality standards for the industry, the performance of the Ukrainian oil refineries in 2011 indicates that this transition will not happen within the specified period.
You can read full article in journal «Terminal: Oil Review» №7 (593) 20 Feb 2012
