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Argus Fuel Components (Russia and CIS) 2015

Global price reporting agency Argus held the 2nd Argus Fuel Components conference in Moscow on 9 December 2015. The event was supported by research and information centre Rupec. The title partner of the conference was gas processing and petrochemical company SIBUR.

The conference was attended by producers of motor fuels and fuel components, petrochemical companies, retailers, trading, shipping and logistic companies, including SIBUR, Lukoil, Gazpromneft, Impexneftekhim, TAIF-NK, Titan Group of Companies, Tatneft-AZS-Zapad and many others.

The main topics of the conference included Russian and global markets for gasoline and high-octane components, diesel modifiers as well as issues related to substitute fuels.

Conference participants discussed the introduction of new emission standards and the readiness of Russian producers to adapt to these changes. Some refinery upgrade projects are still behind schedule, according to the Russian energy ministry, but market participants that took part in an interactive poll came to the conclusion that supplies of Euro-5 compliant fuel will be sufficient in 2016.

Impexneftekhim deputy director-general Leonid Kruchinin presented several forecasts for consumption of high-octane components made by different companies at different times, which ultimately proved to be inaccurate. Some market participants expected these products to be in tight supply. But several refineries faced a surplus of high-octane components — such as alkylate — in 2015, and these producers are successfully selling their supplies in the domestic and export markets. This could encourage producers of methyl tertiary-butyl ether (MTBE) to increase output and exports of fuel components. Argus analyst Anastas Gatunok noted that the upward trend in global demand for MTBE is holding steady, with China driving growth.

Russia clearly has sufficient capacity meeting the necessary technical requirements to cover domestic demand for high-octane components. This view is supported by data from vertically integrated oil companies and petrochemical companies regarding MTBE and tert-amyl methyl ether (TAME) production and new expansion projects, according to a report delivered by SIBUR strategic development director Dmitri Kolobov.

SIBUR sales and marketing director Alexei Rodichev presented an outlook for expansion of MTBE capacity at SIBUR’s plant in Togliatti. He noted that the company is focused on meeting MTBE demand from Russian producers, but is also considering export opportunities.

The issue of substitute fuels in the Russian market was of particular interest to conference delegates. Russian Car Owners Federation vice-president Dmitri Klevtsov presented the results of gasoline quality inspections throughout Russia’s retail network. He stated that the inspection found signs of technical regulations being violated at over one-third of the inspected filling stations — more than 35pc. In 98pc of cases, signs of prohibited additives were detected at non-networked filling stations. One of the main violations was the use of monomethylaniline (MMA), the excessive concentration of which helps to reach the required octane number in substitute fuel. “We checked 367 filling stations from Moscow to the south of the country. The analysis showed that MMA content was five times higher than the maximum permissible level. Our research shows that only 2pc of fuel offered at networked filling stations does not comply with the technical regulation. The main violators are product storage operators,” Klevtsov said. Most of the violations and non-compliance detected at the 367 filling stations between Moscow and the Black Sea coast (43.4pc) were detected in Moscow.

An analysis of the market balance confirmed that fuel producers do not rely on MMA supplies. “We do not and will not use MMA. I believe that MMA is the product that leads to counterfeit fuel in the market. Therefore any use of octane boosters in fuel must be banned. This is Lukoil’s position,” Lukoil’s head of technology, production and planning, Alexei Ivanov, said. He noted that the main MMA consumers remain product storage facilities, which account for 90pc of counterfeit fuel in the country.

Dmitri Kolobov presented a comprehensive analysis of MMA application in Russia, noting that the Russian petrochemical industry needs a reasonable and consistent policy in the motor fuel sector to ensure that the interests of investors, consumers and communities are balanced. The ban on MMA production and sales — stipulated in the technical regulation of the Customs Union — is supporting this balance as the use of MMA results in higher environmental risks for consumers, lowers investors’ interest in developing new capacity for the production of legal high-octane components, encourages the production of substitute fuels and requires aniline, a valuable feedstock for producing chemical products with a high added value. In addition, the use of MMA is not supported by regulators, non-governmental organisations and large industrial companies. International practice with regard to regulating the use of MMA as a fuel component consists of direct bans — including in Belarus and China — or the discouragement of its application.

A report by Gazpromneft head of marketing Iliya Ivanov also focused on counterfeit products and provided an analysis on the use of substitute diesel in Russia. Ivanov noted that the sharp rise in excise taxes on motor fuel since 2012 provided the economic basis for substitute fuel to find a place in the market. For example, the lack of excise taxes on heating fuel — before July 2013 — and MGO boosted the competitiveness of these products against diesel fuel that complied with the requirements of the technical regulation. Strong seasonal demand for fuel, in particular for winter diesel and high-octane gasoline that cannot be met in full, encourages the supply of substitute product in the market, Ivanov noted.

Lukoil senior manager for development and business analysis Sergei Kolyada reported on the situation in the European diesel market, noting that the trend of motor fuel market development may switch to gasoline from diesel in the near future.

Innospec Rus director-general Nikolai Filippov and VNII NP deputy director-general Alexander Danilov presented their reports on diesel modifiers. Danilov underlined Russia’s dependence on imports for some diesel additives and proposed reviewing the opportunity for their substitution.

The last conference session included a round-table meeting to discuss forecasts for production and consumption of gasoline components in 2016.

In response to a question about the closure of Lukoil's Ukhta refinery, Alexei Ivanov said the plant is running normally and that Lukoil is not planning to close it.

The participants of the round-table session reviewed the prospects for Euro-6 compliant fuel in Russia and associated changes in technology and the economy. The delegates also discussed the opportunities for gasoline exports and imports as well as the position of the Russian government on the timeframe for Euro-4 and Euro-5 fuel turnover.

The next Argus fuel components conference will take place in 2016.



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