PRESS: Lukoil says overflowing Russian refineries may be suspended

MOSCOW, Apr 7 (PRIME) – Russia’s refineries can be suspended because of excess of oil products triggered by products transportation problems in the wake of the Western sanctions, Kommersant business daily reported on Thursday quoting a letter of oil major Lukoil CEO Vagit Alekperov to Deputy Prime Minister Alexander Novak.

Lukoil, Russia’s second largest refiner, owns four refineries. In 2021, the company refined around 43 million tonnes of oil. The sanctions resulted in a significant fall of fuel oil transportation and in excess of fuel oil in storages, which could lead to suspension of oil refineries and reduction in fuel output, Alekperov told Novak as quoted by Kommersant.

Lukoil suggested redirection of excess fuel oil to the thermal power plants that usually burn fuel oil when natural gas supplies are disrupted or gas consumption limits are exhausted to avoid that.

The rules of the energy market say that thermal power plants have to burn the cheapest fuel, which is usually natural gas. In 2021, fuel oil accounted for only 2% of consumption of thermal power plants.

But consumption of fuel oil by power plants will force oil companies to pay more for the negative impact on the environment. Lukoil wants the government to suspend higher ratios on forced burning of fuel oil and excessive burning of associated petroleum gases, which may also rise due to inability of oil companies to export liquefied petroleum gases caused by the sanctions.

The Natural Resources and Environment Ministry thinks that approval of the Lukoil’s proposals will reduce environmental payments to the regional budgets. The ministry suggested recalculation of gross emissions by reflecting higher burning of fuel oil instead to increase payments for the negative impact on the environment. The increasing ratios will not be included in the emission quotas.

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