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The Eleventh Meeting of the Expert Board of Transneft, JSC, Was Held

Date of publication: 30 October 2014 Printable version

The eleventh meeting of the Expert Board of Transneft, JSC, was held; its participants discussed the situation on the Russian market for oil products and the development outlook for the system of oil product trunk pipelines.

The meeting was opened by Mikhail Margelov, Vice President of Transneft, JSC, who was officially appointed to this post on October 27, 2014. In the company, he supervises foreign economic activities and public relations.

In his welcome speech addressed to the participants in the meeting, M. Margelov emphasized the importance of the work done by the Expert Board of Transneft, JSC, as an important site for discussing the relevant aspects of the Russian fuel and energy sector development. He expressed confidence that such meetings must be regularly held in the future.

Talking about the development of pipeline transportation of oil products, M. Margelov underlined that the transportation system should meet the growing demand for fuel transportation both to the RF domestic market and abroad. The oil product pipeline system needs to be developed using state-of-the-art technologies that ensure a high level of reliability, industrial and environmental safety, and an optimal level of transportation costs.

The Vice President said that an increase in the quantity and improvement of quality of oil products produced in the RF are expected in the foreseeable future. In 2015, most plants connected to the system of oil product trunk pipelines will produce Euro 5 diesel fuel and deliver it to the system of oil trunk pipelines (OTP). At the same time, M. Margelov emphasized that the infrastructure of pipeline transportation of oil products needs to be significantly improved. Thus, the quantity of oil product transported via the system of oil product trunk pipelines is expected to grow from 31 million tons in 2014 to 59 million tons by 2020.

Talking about reorientation of an oil pipeline for transportation of oil products, M. Margelov said that this is a unique experience, which, however, does not resolve the problem of upgrading facilities of oil product pipeline transportation.

Extracts from the speech delivered by Vladimir Nazarov, Deputy Vice President – Director of the Oil Transportation, Metering and Quality Department at Transneft, JSC

Vladimir Nazarov said that the Company records a growth of the resource base of high quality oil products, including the output capacity of plants that have not been connected to the system of oil product trunk pipelines yet.

He pointed out that, according to statistical data, the production of diesel fuel in Russia is somewhat excessive at present. Fuel is less consumed in the domestic market than exported. For this reason, Transneft, JSC, provides for, first and foremost, expanding exports, while developing an OTP system for supplying oil products to the domestic market, taking into account the growing needs of consumers.

Sever Project Development

The Sever Project with a designed capacity of 8.5 million tons is the main project for exporting oil products through pipelines.

V. Nazarov pointed out that the current actual transportation level overpasses this indicator and may reach 11 million tons in 2014. Modernization of the project facilities at the first stage will make it possible to achieve the transportation volume of 15 million tons annually. At this stage, some pump stations and oil product pipelines will be partially revamped and updated and oil pipelines will be reoriented for pumping oil products. After implementation of the second stage of technical measures, transportation of 25 million tons of diesel fuel annually is planned to start in 2018.

Yug Project Implementation

Mentioning the Yug Project implementation outlook to supply diesel fuel via pipelines to the port of Novorossiysk, Vladimir Nazarov explained that implementation of the first stage of the project is scheduled for 2016. At this stage, the existing oil pipeline from Tikhoretsk to the Sheskharis station (Novorossiysk) will be reoriented to transport diesel fuel, and capacity of this project will reach 6 million tons of oil products annually starting from 2016.

He also said that at present railway shipments to the ports of Novorossiysk are performed at the Nikolskaya pump station (Tambov Region).

The second stage of the Yug Project implementation is the construction of the Volgograd – Tikhoretsk oil product pipeline. The design capacity of this OTP will reach 6 million tons as well. Its resource base will be supported by the Volgograd NPZ (LUKOIL) and an additional volume of oil products from other plants will be supplied by railway and received at the Tinguta station (Volgograd Region).

«Therefore, there is sophisticated combined transportation: at first from oil refineries (NPZ)_via the system of pipelines to the Nikolskaya station in the Tambov Region, then from the Nikolskaya station to Volgograd by railway, and then to Novorossiysk via pipelines», said V. Nazarov.

There is a possibility in the future of increasing diesel fuel supplies along the Volgograd – Tikhoretsk – Novorossiysk route to 9 million tons of fuel annually.

Supplies of Oil Products to the Moscow Region

V. Nazarov also emphasized that while transporting oil products to the domestic market, ensuring continuous supplies of oil products to the Moscow Region is one of the Company’s priority tasks.

«This area is the largest consumer of gasoline, diesel fuel, and the largest hub in terms of aircraft fuel supplies», he said. This is why the pipeline infrastructure development in the Moscow Region are a priority concern.

The transport system of Mostransnefteproduct, JSC, is part of the Transneft, JSC, system. Around Moscow, there is a ring oil product pipeline which includes three branches: one ring for pumping diesel fuel, another for gasoline, and yet another for kerosene.

In order to increase aircraft fuel supplies to the airports of the Moscow Air Hub, the Company plans to build a railway loading ramp at the Shilovo-3 station to receive jet kerosene from the railway. The designed capacity of the station will reach about 2.5 million tons annually. The Shilovo-3 – Ryazan LODS oil product trunk pipeline will be built thereafter to transport three types of fuel: aircraft fuel, car gasoline, and diesel fuel to the Volodarskaya LODS (Moscow) via three separate pipelines.

«Only two pipelines are currently operated transporting diesel fuel and jet kerosene. There will be three separate pipelines in the future», said V. Nazarov, adding that in this case the Ryazan Refinery of Rosneft Oil Company, OJSC, can enter the Moscow market with any type of products, avoiding railway delivery.

V. Nazarov also explained that the Company currently starts developing and implementing a project of pipeline transportation of motor gasoline from the Nizhny Novgorod Refinery (NORSI – LUKOIL, OJSC) to the Moscow area. It is planned to use the oil pipeline at the section from Nizhny Novgorod to Ryazan: it will be reoriented to transport motor gasoline and diesel fuel and supplies to the Moscow area will be further made from Ryazan via the existing system of oil product pipelines.

Diesel fuel and motor gasoline will be transported along the NORSI – Ryazan route by batching.

In addition, V. Nazarov noted that they consider a future possibility of pumping motor gasoline from the Tatar and Bashkir groups of plants to NORSI.

«Therefore, we can see that the resource base of motor gasoline of about 2.5 million tons makes it possible to implement this project and saturate the Moscow area. As regards diesel fuel, we can additionally transport from 1 to 3 million tons: in this case demand of Moscow and the Moscow Region for this fuel will be met at 100%. Demand for aircraft fuel will be met at 80–90%», he said.

Supplies of Oil Products to the Leningrad Region Domestic Market

V. Nazarov emphasized that the Leningrad Region and particularly Saint Petersburg are as well very important in terms of supplies of oil products to the domestic market.

At present, diesel fuel shipments to the domestic market from the OTP system of Transneft, JSC, in this area are carried out only from the Krasny Bor LODS. Furthermore, jet fuel is transported via pipelines from the Kirishinefteorgsintez Refinery (Surgutneftegaz, OJSC) to the Pulkovo refueling complex.

V. Nazarov said that, with due consideration of the Sever Project development, it is possible to additionally supply diesel fuel to the Saint Petersburg and Leningrad Region market. For this purpose, Transneft, JSC, builds a station of diesel fuel loading onto motor vehicles with a capacity of 600 thousand tons annually at the Nevskaya pump station, which will make it possible to transport Euro 5 fuel to consumers.

V. Nazarov said that transportation at the section from the Krasny Bor LODS to the Ruchyi oil depot is currently challenged. There are a number of technical limitations and issues relating to this pipeline operation in this area. For this reason, Transneft, JSC, considers the option of stopping transportation in this direction starting from 2015.

V. Nazarov also pointed out that the Company monitors the demand for diesel fuel in this area in real time. The Company believes that there will be no diesel fuel deficit in this area through lacking pipeline facilities.

Reduction of Euro 5 Diesel Fuel Pipeline Transportation Time

The Deputy Vice President also said that in 2014 the Company practically replenished its technological stock of Euro 5 fuel in the OTP system. This will make it possible to reduce in 2015 the time of fuel transportation at long-distance routes to less than 7 days, enabling oil companies to save their financial charges.

«This is very important for the market because demand in a specific area depends on a product availability today, and not tomorrow. We therefore can see that we will transport a product faster at certain distances than by railway and will create additional competition for it», said V. Nazarov.

Extracts from the speech delivered by Rasim Mingazetdinov, Head of the Strategic Development Department of Transneft, JSC

In his turn, Rasim Mingazetdinov pointed out that the process of connecting linear subsidiaries of Transnefteproduct, JSC, to subsidiaries of Transneft, JSC, has been virtually completed. This integration allows for resolving many operational problems of Transnefteproduct, JSC.

He reminded that once construction of facilities of the Eastern Siberia – Pacific Ocean (ESPO) oil pipeline, the special sea oil port of Kozmino and the Baltic Pipeline System – 2 were completed, a surplus has been formed in the western area. «Oil pipelines transport about 90 percent of the total oil extracted in the RF. However, the situation with oil products is different: it makes approximately 25 percent of the total production of light oil products in the RF. The pipeline transportation of oil products operates in a competitive environment and we want to increase this share», said R. Mingazetdinov.

For example, the Tyumen – Yurgamysh oil pipeline is planned to be reoriented to pump oil products of the Antipinsky Refinery. «This work is close to an end and in December 2014 the Tyumen – Yurgamysh oil pipeline will be ready to transport diesel fuel», said R. Mingazetdinov.

In addition, under the instruction of the RF Government, Transneft, JSC, completes preparation of the Kirishi – Primorsk oil trunk pipeline for transporting diesel fuel. «Control pumping has been made and it has been confirmed that the oil pipeline is well cleaned and the diesel fuel quality remains at the Euro 5 level», said R. Mingazetdinov.

In the future, when expanding the facilities of the Sever Project, the oil pipeline from Yaroslavl to Kirishi will be reoriented in the same way for pumping oil products; several oil pump stations between Nizhny Novgorod and Yaroslavl will be updated for transporting oil products, which will increase the volume of pumped products for exports and to the domestic market.

R. Mingazetdinov emphasized that such reorientation permits Transneft, JSC, to save billions of rubles, as construction of additional pipelines would require much higher expenses.

«We have a well-developed scheme and there is no doubt that we will reach the planned targets of oil products transportation by 2020. There is a resource base, pipelines are actually available, so we are confident that all the plans will be implemented», said R. Mingazetdinov in conclusion.

The materials of reports as well as the statement of the Expert Panel members will be available at www.transport-nefti.com since November 05, 2014.

According to the media and own information.
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