In the first of a series of articles focussing on nations involved in the tank storage industry we journey to Russia – the third-largest producer of oil (after Saudi Arabia and the United States) in the world and a nation that is highly dependent on its hydrocarbons. Oil and gas revenues accout for more than 50% of the federal budget revenues. Following the collapse of the USSR Russia’s petroleum output fell sharply, but rebounded as the country transitioned from communism to capitalism. Russia is both a major producer and exporter of oil, and its economic growth since the collapse of communism has been driven by energy exports, to such an extent that a recent report from PFC Energy stated that over 70% of total export revenues came from oil and gas.
Russia’s proven oil reserves were 80 billion barrels as of January 2013, according to the Oil and Gas Journal. Most of Russia’s resources are located in Western Siberia, between the Ural Mountains and the Central Siberian Plateau and in the Volga-Urals region, extending into the Caspian Sea. Eastern Siberia holds some reserves, but the region has had, as of yet little exploration. Russian companies are also expanding into the Arctic and Eastern Siberian regions, spurred on by tax holidays and lower oil export tariffs. While several new fields have come on line since 2009, bringing additional fields into production will take time and may require a reformed oil tax regime from the government.
Refineries and storage:
Russia has 40 oil refineries with a total crude oil distillation capacity of 5.5 million bbl/d, according to Oil and Gas Journal. Rosneft, the largest refinery operator, has a crude distillation capacity of 1.3 million bbl/d and operates Russia’s largest refinery, the 385,176-bbl/d Angarsk facility. LUKoil is the second-largest operator of refineries in Russia with a crude distillation capacity of 1 million bbl/d.
There are at least 18 ports serving as export outlets for Russian oil to various markets, including Europe, North and South Americas, and Asia. Three of the key facilities:
Primorsk is Russia’s largest oil terminal, with a loading capacity of 1.5 million bbl/d. It is located near St. Petersburg and is a two-berth harbor that can accommodate ships with maximum length of 307 meters (335 yards).
Yuzhny terminal is located in Ukraine, near Odessa, although it mainly exports Russian and Kazakh crude oil via the Black Sea. This port’s load capacity is 315,000 bbl/d, and it can accommodate vessels up to 70,000 dwt.
Varandey is a fixed, ice-resistant offshore oil export terminal in the Russian Arctic, owned and operated by LUKoil. The terminal’s capacity is approximately 240,000 bbl/d. Oil loaded at Varandey is shipped west to Murmansk for reloading onto larger vessels.
Estimates of reserves in Russia vary significantly though in July 2013, the Russian Natural Resources Ministry made official estimates of reserves available for the first time. According to Russian Natural Resources Minister Sergey Donskoy, as of 1 January 2012, recoverable reserves of oil in Russia under category ABC1 (equivalent to proven reserves) were 17.8 billion tons and category C2 reserves (equivalent to probable and possible) were 10.9 billion tons. Though significant reserves are contained in the Bazhenov Formation, with Wood Mackenzie seeing up to 2 trillion barrels of oil in place.
|Source: Eastern Bloc Energy|
Outlook: With such huge resources and further (albeit difficult to access) available in Siberia and the Arctic, the outlook for Russian tank storage is generally bright. However with production costs increasing and an economy so heavily tipped towards oil revenue there are some that see without modernisation and economic diversification the Russian oil boom and be extension the country could run into some serious trouble. For more information on the Russian oil market visit the US Energy Information Administration.