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Russian base oil exports stabilize

CIS BASE OILS AND LUBRICANTS

Russian base oil exports stabilize

Russian base oil export volumes are off an estimated 1% this year after a 12% decline in 2018 caused by an unusually large amount of maintenance work, Lubes’n’Greases reports.

According to Denis Veraksin, DYM Resources Director of Base Oils and Waxes, after surging in 2016 and 2017, base oil exports from Russia slid to 1.11 million metric tons last year and are on pace for 1.1 million tons this year.

The government now hopes to reverse this trend [through] lower base oil export duties. For comparison, Russia decreased the base oil export duties to the level of U.S. $31.50 per ton in December 2017, compared to $250/t three years prior.

Denis Veraksin, DYM Resources Director of Base Oils and Waxes

Export levels have stabilized this year and could rebound because of depreciation of the ruble currency and a further reduction in the export duties, he added.

Russian major oil companies’ refineries located in the European and Asian parts of the country have an average distance of 2,500 kilometers to the main ports. With the country’s currency depreciation of over 50 percent since 2014 and rail tariffs paid in Russian rubles, rail transportation costs in hard currency terms became at least about 50 percent cheaper, so this, along with further decrease of the base oil export duties, will lead to improved economics and stabilization of the export shipments in 2020.

Denis Veraksin

Lukoil is the largest base oil exporter, responsible for 51% of volumes in 2018, followed by Rosneft with 25%, Tatneft with 13%, and Gazprom Neft with 11%.

The Baltic Sea is the largest export hub for Russian base oils. Baltic hubs hold around 47% of the total base oil exports from the country. Last year 520,000 tons of base oils were shipped from Baltic ports to the Netherlands, Belgium, Germany, the United Kingdom, and West Africa. The second largest hub is the Black Sea port of Novorossiysk, conduit for 193,000 tons last year.

A total of 159,000 tons was transported by land into Ukraine and another 36,000 tons into China.

Several Russian oil majors have stated plans to carry out upgrades of base oil plants. If completed, those projects would add at least 500,000 tons of new Group II and Group III base oil capacity within the next three to four years.

An additional factor for investing in new capacities is the domestic consumers’ switch to higher quality lubricants, while the government pushes for modernization of the country’s oil industry.

Denis Veraksinv

DYM Resources is a trading company focused on base oils, waxes, and other petrochemicals products from refineries in Russia, Turkmenistan, and Uzbekistan.