RussNeft Needs a Refinery.

"We know how to acquire new assets not breaking the law and staying within the bounds of running the business" - RussNeft President Mikhail Gutseriev informed the press during the opening of the oil loading terminal. It is this knowledge that has helped him to transform within two years a small oil-producing enterprise into a company with $3 billion turnover and 1.2 million tons of crude oil per month.
However Mikhail Gutseriev is not going to stop half-way. He informed that in the nearest future the Company would continue to acquire production assets. Besides, RussNeft will keep on investing funds into development of exiting oilfields. It will cost much money as 2005 investment program of the Company specifies an amount of 260 million dollars. But the management of the Company is of the opinion that their policy aimed at bringing the production level up to 1.6 million tons/month justifies the means already invested. To become full-value vertically integrated RussNeft only needs have its own refining. Even so the Company has already got its own r petrol stations. In the beginning of this year the Company bought one of the biggest Moscow’s retail network called Grand. Presently the petrol stations of RussNeft are supplied with oil products yielded from the Company’s crude oil processed at  Yukos’ refinery in Syzran. After Yuganskneftegaz was sold the Refinery was facing feed problems, therefore RussNeft proposal of 3 million tons of processing crude in a year was accepted with enthusiasm. To tell the truth, currently the Company is processing only 100-150 thousand tons per month, just enough to supply its petrol stations. The rest of the feed is exported. Before recently export volumes were limited by Transneft quotas. The Company was allowed to export by pipe only 33 percent of the crude oil produced. And another 10 percent were shipped by railway. Now after starting up its own first terminal RussNeft may forget about these problems. The terminal is designed to transship 5 million tons a year, and in future its capacity may be increased up to 7 million tons per year. And its favorable disposition near the border with Byelorussia reduces transport expenses.
While the terminal was under construction the situation changed indeed. To be specific, the domestic price of crude oil has gone up and now it is more interesting to sell the crude in Russia instead of shipping it abroad. Moreover Mikhail Gutseriev has a strong intention to get over the last point separating RussNeft from vertical integration. For that the Company is scrutinizing the possibility of either buying or constructing a refinery. The management of the Company refuses to say whichever option will be chosen. Both options have their pros and cons. Most existing refineries have become obsolete and require debottlenecking that may cost more than constructing a new refinery. On the other hand, RussNeft has got consolidated at Syzran Refinery, which may soon be put up for sale in the framework of Yukos legal proceedings. Somehow or other RussNeft is going to get its own refining not later than in 2 years, as Mikhail Gutseriev firmly promised. Although it will rather happen earlier.
The new terminal is not going to stay idle waiting for RussNeft to increase its processing volumes. Free capacities can be made available to those companies that have presently got no access to the export pipeline, said Gutseriev. Small companies forming part of Assoneft Association may become the first interested. Though in Assoneft has not commented on this proposal. However small oil producers, that are ever complaining of the impossibility to export their crude, must find RussNeft initiative at least interesting.