Baku, December 2015

Challenges Facing the Oil Refining and Petrochemical

Sectors in Russia under the Economic Crisis

V.M. Kapustin,

OAO VNIPIneft General Director; Gubkin Russian State Oil @ Gas University, Head of the Oil

Refining Technology Department; RF Honoured Scientist

OAO VNIPIneft

2

STATUS OF OIL REFINING AND PETROCHEMICAL SECTORS

IN RUSSIA IN 2015

MT

2015, 10

months

2014, 10

months Difference

Refining capacity 234,3 239,7 -5,40

Products:

Motor gasoline 32,4 31,5 0,90

Jet fuel 8,3 9,3 -1,00

Diesel 63,1 64,0 -0,90

Fuel Oil 59,2 64,3 -5,10

Average load ratio, % 94,0 95,0 -1,00

Oil conversion level, % 74,1 72,4 1,70

MT

2015, 9

months

2014, 9

months Difference

Products:

olefins 2,7 2,4 0,30

polyethylene 1,2 1,1 0,10

polypropylene 1,15 0,90 0,25

Petrochemicals in RF

Petrochemicals in RF

MAJOR CHALLENGES IMPEDING THE GROWTH OF REFINING AND

PETROCHECMICAL SECTORS IN RUSSIA

Financial sanctions imposed by the USA

and EC

High import dependence in the industry

Increase in equipment cost due to the

weakening rouble

Ambiguity in tax policy

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4

Refining output and conversion level over 2005-2015

Refining output over 2005-2015

Oil conversion level over 2005-2015

Refining output over 2005-2015

Oil conversion level over 2005-2015

2015

forec.

2015

forec.

5

Refining capacity dynamics over 2005-2015 in Russia

Refining capacity dynamics over 2005-2015 MTA

Process 2005 2010 2015 % as compared

to 2005

Crude distillation 265.9 276.5 304.5 114.5

Catalytic reforming for hydrorefining 26.1 26.1 29.1 111.5

Diesel hydrotreating 70.5 70.6 79.2 112.3

Catcracked gasoline hydrotreating - - 5.0 -

Isomerization 1.9 6.2 9.1 478.9

Catalytic Cracking 17.8 21.2 24.6 138.2

Alkylation 0.6 1.3 2.1 345.0

Hydrocracking 6.9 9.5 15.8 229.0

Coking 5.3 5.9 8.0 150.9

Vacuum residue visbreaking 12.7 22.7 24.3 191.3

Low oil prices lead to higher refinery

margins

Implementation of import substitution

measures

Optimization of existing plants

NEW APPROACHES TO REFINING SECTOR DEVELOPMENT

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OPTIMIZATION OF EXISTING PLANTS

Measures aimed at

optimization of

existing plants

Direction 1

Measures aimed at improving economic efficiency

(profitability) of operating capacities

Direction 2

Assessment of operating capacity state

Direction 3

Resolution of ongoing issues

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IMPORT SUBSTITUTION IS A NEW CHALLENGE FOR THE INDUSTRY

• Working teams for the following areas of activities were

set up with direct involvement of the Ministry of Energy

and the Ministry of Industry and Trade of the Russian

Federation:

- Import substitution in process development

- Import substitution of catalysts for refining and petrochemical

processes

- Import substitution of additives to engine fuels and lubricants

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9

CDU/VDU PROCESS

Produces vacuum gas oils with high end-boiling points

up to 580оС

up to 600оС

Low metal content

High diesel fuel evaporation rate (up to 99% of feed

potential)

Primary benefits of the process:

CDU/VDU

OAO TAIF-NK

ОАО Gazprom neftekhim Salavat

OJSC TANECO

ООО LUKOIL-Volgogradneftepererabotka

VDU

ООО PO Kirishinefteorgsintez

ОАО Rosneft-Tuapse Refinery

ООО LUKOIL-Permnefteorgsintez

Implementation:

Developers: ОАО VNIPIneft, OAO VNIINP

All the major projects were implemented by Russian designers and researches

Large-size equipment such as columns, furnaces, tanks were supplied by Russian equipment

manufacturers.

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LICENSORS OF CATALYSTS AND PROCESSES

IMPROVING THE OIL PRODUCT QUALITY

Process Licensors

International Russian

Hydrotreating Axens,Exxon Mobil,

Haldor Topsoe,

CBI Lummus

VNII NP jointly with VNIPIneft

Institute of Catalysis SB RAS

(catalysts)

ZAO Katakhim (catalysts)

Alkylation Axens, Stratco, UOP

CBI Lummus

Institute of Petrochemical Synthesis

RAS (pilot trials)

RAS Group

Isomerization Axens, UOP, CDTECH NPP Neftekhim

Reforming Axens, UOP NPP Neftekhim (catalysts)

Institute of Hydrocarbons

Processing SB RAS (catalysts)

ООО NPF OLKAT(catalysts)

Most projects are based on international processes

NEW REFINING PROCESSES IMPLEMENTED

AT RUSSIAN REFINERIES IN 2010-2015

Vacuum distillation unit yielding VGO with end-boiling point 560-

580°С (VNIPIneft, VNII NP)

Low-temperature isomerization(Isomalk-2 and UOP)

Hydrogen fluoride alkylation (UOP)

Catcracked gasoline hydrotreating (Axens)

Summer diesel hydrodewaxing

Secondary distillates hydrogenation (VNII NP)

Hydrocracking and production of Group III lube oils (Chevron)

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LICENSORS OF DEEP CONVERSION

PROCESSES

Process Licensors International Russian

Catalytic

Cracking

VGO Axens, CBI Lummus, KBR, Exxon

Mobil, Shell, Stone & Webster, UOP

Institute of Petrochemical

Synthesis RAS, OAO VNII NP,

OAO VNIPIneft

oil residues Axens, KBR, UOP

Russian processes are not available

Hydrocracking

VGO Сhevron Lummus, Axens, UOP OAO VNII NP, OAO VNIPIneft

oil residues Axens, Сhevron Lummus Russian processes are not available

Fluid catalytic cracking UOP, ENI – pilot trials Institute of Petrochemical

Synthesis RAS, OAO VNIPIneft -

pilot trials

VCC KBR Russian processes are not available

Coking

delayed CBI Lummus,Foster Wheeler,

Conoco Philips

GUP Institute of Oil Refining and Petrochemistry, UGNTU

continuous Exxon Mobil Russian processes are not available

Production of Group III lube oils Сhevron Lummus, Exxon Mobil Russian processes are not available

Most projects are based on international processes.

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OJSC TANECO HEAVY COKER GAS OIL

HYDROTREATING

Capacity: 850 kTA

Licensors: Axens

OAO VNIPIneft’s scope of work:

development of Detail Documentation

HYDROCONVERSION OF HEAVY RESIDUES ON NANO-SCALE CATALYSTS

Parameters

Hydro-

conversion by Institute

of Petr.Synth.

Process conditions:

- pressure, MPa 7.0-8.0

- temperature, °С 440-450

Catalyst quantity, % wt 0.05

Information by Institute of Petrochemical Synthesis

RAS

Developers: Institute of Petrochemical Synthesis RAS, Institute of Problems of

Chemical Physics RAS, INKO-TEK Tatneft

Implementation:

• OAO Tatneft - 50 KTA

(Basic Design is completed, Authority

and Detail documentation is under development))

It is planned to implement:

• ОАО Gazprom (Astrakhan) – 500 KTA

• ОАО Gazprom neft (Moscow) – 2.0 MTA 14

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Construction of Catalyst Production Complex in OAO

GAZPROMNEFT-OMSK REFINERY

Capacity:15 kTA of catalytic cracking catalysts 4 kTA of diesel fuel hydrotreatment catalysts 2 kTA of hydrocracking catalysts 2 kTA recovery/reactivation of hydrogenation processes catalysts

Licensors: Institute of Hydrocarbons Processing SB RAS, Institute of Catalysis SB RAS

OAO VNIPIneft’s scope of work: Development of Basic engineering solutions and issue of investment feasibility study

Project objectives: Creation of state-of-the-art industrial complex for production of catalytic cracking and hydrogenation catalysts within the framework of the import substitution programme to meet the catalyst demand of GAZPROM Group refineries and other RF Refineries

Project status: marketing research is completed, development of Basic engineering solutions is coming to a close, investment feasibility study is under preparation for issue

Time of putting into operation: 2018

DIESEL FUEL HYDROTREATMENT

ОАО ANGARSK PETROCHEMICAL COMPANY

Capacity – 4 MTA with producing the Euro 5 diesel fuel

Licensor and Basic Design developer - Exxon Mobil

OAO VNIPIneft’s scope of work: Basic Design acceptance, Detail

Engineering, and Designer Supervision

Project status:

– updating Authoring Engineering and Detail Engineering

Documentation to bring it in conformity with RF applicable codes

and regulations

– procurement is 98% completed

– construction and installation work is ~ 70% completed

Time of putting into operation – 2017 .

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Creation of TANECO Complex

• The implementation of Refining and

Petrochemical Complex in Nizhnekamsk was

initiated by the Republic of Tatarstan

Government in 2005

• ОАО VNIPIneft developed in full scope

Authority Engineering Documentation for the

Complex with a capacity of 7 MTA and

ensured obtaining of State Expert Review

favourable conclusion

• ОАО VNIPIneft came up with a proposal and

engineering substantiation for the construction

on the allocated area of a refining complex

having a crude capacity of 14 MTA

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ОАО VNIPIneft developed Detail Engineering

for a number of process units and Off-Site

Facilities.

• Capacity: 7 MTA

• General Design Contractor: OAO VNIPIneft

• OAO VNIPIneft’s scope of work: Development of Basic Design;

Authority and Detail Engineering; equipment procurement; designer’s

supervision

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OJSC TANECO CDU

• Time of putting into operation:

2011

OJSC TANECO HYDROCRACKING COMPLEX WITH HYDRODEWAXING

Capacity: 2.9 MTA

Licensors: hydrocracking, hydrodewaxing - Chevron Lummus,

hydrogen production – Haldor Topsoe

General Design Contractor: -OAO VNIPIneft

OAO VNIPIneft’s scope of work: Development of Authority and Detail Engineering;

equipment procurement; designer supervision

Status of the Hydrocracking Complex Project: commissioned in 2014

Oil Plant was commissioned in December 2014

VGO

Residual fraction

For lube oils of Groups II and III

Diesel

Kerosene

Gasoline

Liquified gases

Hydrodewaxing Unit

Heavy Distillates

Hydrocracking

Unit.

Hydrogen Plant

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Project: Creation of a new petrochemical complex:

Composition:

• Ethyleneplant -1 MTA

• High DensityPolyethyelene Plant - 450 KTA

• Linear lowdensity polyethyelen plant - 415 KTA

• PolypropylenePlant - 500 KTA

• ButadienePlant - 85 KTA

• MEG Plant - 300 KTA

Project status:

• The bid is underway to select General Design Contractor for the Complex

Year of putting into operation: 2020

WEST-SIBERIAN CLUSTER OOO ZAPSIBNEFTEKHIM

(Tobolsk)

General Design Contractor – ОАО VNIPIneft

Composition:

Ethylene plant, 1500 KTA (Licensor - Linde)

Polyethylene plant, 1500 KTA (Licensor - INEOS)

Polypropylene plant, 500 KTA (Licensor - LyondellBasell)

Project status:

Detail Documentation for the Complex is under development (Ethylene

plant - Linde; Polyethylene plant - Technip; Polypropylene plant -

UHDE; Off-Site facilities - OAO NIPIgazpererabotka)

WEST-SIBERIAN CLUSTER OOO NOVY URENGOY GCC

General Design Contractor – ОАО VNIPIgazdobycha

Composition:

Ethylene Plant, 420 KTA (Licensor – Linde))

Low Density Polyethyelene Plant - 400 KTA (Licensor – Basell))

OAO VNIPIneft’s scope of work:

Updating Detail Documentation for the Ethylene and Polyethylene

Plants and Storages as related to civil engineering design

Participation in Designer’s Site Supervision

Project status:

Construction and erection work for the process units is in progress:

the Complex’s completion degree ~ 60%

The year of putting into operation - 2017

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OAO VNIPIneft’s scope of services:

Procurement

Construction management

Pre-project work

85 years on the market of engineering services

Largest projects implemented in recent years:

Design

OAO VNIPIneft: LEADING RUSSIAN ENGINEERING COMPANY FOR OIL

REFINING, GAS PROCESSING AND PETROCHEMICAL INDUSTRY

Refining:

CDU, catalytic cracking, isomerisation, hydrotreating units (OJSC TANECO, OAO TAIF-NK, OOO

PO Kirishinefteorgsintez,

ОАО Gaspromneft-Moscow Refinery)

VGO Hydrotreating complex (ZAO Ryazan Oil Refinery Company)

VGO Hydrocracking Complex (OJSC TANECO, ООО Slavneft-Yaroslav-nefteorgsintez, ООО

LUKOIL-Permnefteorgsintez, OOO PO Kirishinefteorgsintez)

Petrochemicals:

Petrochemical complexes of OOO Sibur in Tobolsk and Perm

Petrochemical complex of OAO Gazprom in Novy Urengoy

Petrochemical complex of OAO LUKOIL in Budenovsk

Petrochemical complex of OAO TAIF in Nizhnekamsk

CONCLUSIONS

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Under the current economic situation the government’s top priority should be import

substitution, improving competitiveness of Russian manufacturers and quality of their

products.

Enhancement of technological specialization and promotion of investments into science-

intensive industries are crucial aspects in development of domestic technologies.

Use of domestic technologies, equipment and services of Russian engineering companies

during modernization of the industry will allow to weaken import dependence and resolve

the issue of import substitution in the industry

OAO VNIPIneft as Russia’s leading engineering company is ready to provide the entire

package of engineering services required in the market to revamp operating and construct

new refining and petrochemical facilities.

Thank you for your attention!