In Russia, small oil refineries are defined as facilities with a primary oil processing capacity of up to 1 million tons per year. Their main advantage is that they are compact, relatively quick to construct, and comparatively inexpensive. As Yuri Stankevich, Deputy Chairman of the State Duma Energy Committee, explained in an interview with "RG," if a project is ready, land with all communications is available, and financing is timely, the cycle for establishing a modern small-scale refinery ranges from one and a half to two years. In practice, however, these timelines often extend to three or four years. Utilizing modular plant solutions could reduce installation time on site to a few months, though initial design and approval phases still take about a year.
For our country, mini-refineries are appealing in terms of logistics, supply reliability, and safety.
Gasoline does not have to be transported by rail or road for hundreds or thousands of kilometers. Nearby towns and enterprises are not dependent on supplies from other, sometimes distant regions. And finally, if such a mini-refinery fails or goes offline, it does not create significant problems on a national scale. Furthermore, there is another argument in favor of mini-refineries in Russia. The vast territory of the country makes deliveries to remote areas, far from traditional refineries, quite costly for both producers and end consumers. This leads to rising fuel prices and inflation, which in turn impacts the economy of regions and eventually the entire country.
This last point is one reason why mini-refineries are often more developed in larger countries. For instance, China is a leader in this area, with about 25% of its oil processed at these small facilities, often referred to as "samovars." In the U.S., mini-refineries account for 10% of refined oil. Although Russia has more operating mini-refineries (about 80) compared to the U.S. (65), only about 5% of the oil extracted in the country is processed at these facilities. There is, of course, a statistical nuance here: in the U.S., small refineries process up to 3.7 million tons of oil per year, while in China, the threshold is 5 million tons. However, 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 classification differences concerning mini-refineries can be overlooked.
However, the above does not mean that Russian entrepreneurs should urgently rush to build mini-refineries. They will not serve as a panacea for all problems. According to Stankevich, mini-refineries can help stabilize the market, but their impact will be specific and localized. They can effectively address local fuel shortages, but they cannot protect the country from global price shocks or systemic supply crises.
Additionally, there are economic, ecological, logistical, and product quality concerns regarding small refineries. The devil, as they say, is in the details.
Dmitry Gusev, Deputy Chairman of the Supervisory Board of the Reliable Partner Association and member of the Expert Council of the “Gas Stations of Russia” competition, believes that the concept of decentralized oil processing is correct from both energy security and fuel supply perspectives. However, there are numerous other factors that must be considered. First and foremost are the economic ones: reducing production costs based on volume will not be feasible; sources of raw materials and pricing regulations for the domestic market remain unclear, as do conditions for joining pipelines, among many other aspects.
Stankevich notes that under the existing tax system, the profitability of such projects hovers near the break-even point without additional support measures. The cost of processing a ton of oil at a small facility is always higher than at a large one due to the lack of economies of scale. The yield of light oil products (gasoline, diesel, aviation kerosene) at these facilities is lower (around 45-55% compared to 80-90% at modern giants).
Small refineries produce straight-run gasoline (naphtha), low-quality diesel, and fuel oil, Stankevich explains. To produce high-octane gasoline that meets Euro-5 standards, they require complex secondary processes (catalytic reforming, isomerization), which become economically unfeasible at small volumes. Therefore, meeting the internal market's demand for quality automotive fuel is only possible for large vertically integrated oil companies (VINKs).
Serguei Frolov, managing partner at NEFT Research, points out that hundreds of mini-refineries currently operate in Russia. Some are legal, while some are not. However, nearly all of them are essentially "samovars" – they perform only primary oil processing with the production of straight-run gasoline and diesel fractions, as well as fuel oil. Mini-refineries producing marketable fuel can be counted on one hand. Building new high-tech mini-refineries or modernizing existing ones to produce market-grade fuel under current tax and economic realities is only feasible with budgetary funds—there is simply no interest from the business sector, the expert asserts.
Modern mini-refineries can indeed be quite technological, agrees Stankevich. Environmental risks are minimized through innovative solutions. However, constructing full-scale deep processing complexes requires significantly larger investments, which brings us back to the economic question. The main barriers lie not so much in the technical aspects but in administrative and financial areas. Without adjustments to the tax system, we should not expect a mass emergence of small refineries. They require a special fiscal model.
As for the existing issues in the fuel market, addressing them through mini-refineries, even with relatively quick construction timelines, will not be effective. The collective capacity of existing facilities is simply too small. According to Sergey Tereshkin, CEO of Open Oil Market, mini-refineries have never played a significant role in fuel production in Russia. However, this may change once permission is granted to use straight-run gasoline for the production of high-octane fuel; this measure would open up the fuel market for technically simpler refineries, the expert suggests. But this could pose risks regarding the quality characteristics of fuel. Overall, increasing imports—partly through subsidies—might play a more crucial role in saturating the domestic market than creating additional opportunities for mini-refineries. This segment is too small to significantly influence the fuel market situation.
Source: RG.RU
