The Omsk Refinery – one step ahead

TASS

The Gazprom Neft Omsk Refinery is one of the most technologically advanced plants in the country. Gazprom Neft has invested billions of rubles in modernising the refinery since 2007, and continues to finance projects for its further development, implementing new production technologies, expanding its product range, and helping develop a federal project in automated environmental monitoring.

Oleg Belyavsky, CEO of the Gazprom Neft Omsk Refinery, who has dedicated 25 years of his live to the plant, talked to TASS about how Russia’s biggest refinery operates, as well as outlining its plans for further modernisation and sharing the secret of building an efficient refinery on tight margins.

— Oleg Germanovich, the plant is now in the final stage of its modernisation programme. What’s next?

— By 2021 we’ll have completed two stages of the modernisation programme started back in 2007, a year after Gazprom Neft took control of the plant. Thanks to which, we have been able to make the transition to full production of Euro 5-class gasolines ahead of schedule, improve efficiency, and reduce environmental impacts. We now face the task of improving refining depth, to at least 97 percent. Figures like these are the sort of indicators now being delivered by the best plants in the world. Going forward, we’ll have other objectives. We’re focussing on improving the performance of existing capacity and facilities, introducing new oil refining and digital management technologies, and improving product quality.

— Will you succeed in finishing this phase of modernisation on schedule? Will it be on budget?

— Work’s going to plan. We should finish everything by 2021. Personally, I’ve no concerns about everything being built on time.

— The company’s investing massive sums in modernisation — RUB300 billion in 2021 alone. Is there ever going to be any pay-off on this?

— We have to operate under market conditions. Every project undergoes a very serious feasibility process, in which economic indicators are the overriding consideration. If a project isn’t viable, it won’t be implemented.

Regarding import substitution and forthcoming upgrading and refurbishment

— Do you work with Russian manufacturers on modernisation projects?

— Yes. We order equipment at our machine-building plants, making sure they work properly, and meet orders on time. More than 280 Russian companies are currently involved in implementing almost 100 projects as part of modernising the Omsk Refinery.

— So import substitution is having an effect. But journalists do, nonetheless, strike a somewhat sceptical note, sometimes ...

— There’s definitely no scepticism here. We met all our objectives last year — which means, everything’s working.

— Do you plan to decommission any facilities for repairs this year?

— Yes, we’ve got planned repairs at 11 facilities this year. All of which will be done according to a strict timetable. We’ll be inspecting all equipment and pipelines during that time, making a full audit. That’s mandatory, and is a pretty stressful time in the life of any plant.

— Typically, when people hear about a refinery stopping for repairs, it rings alarm bells and we start worrying about the availability of fuel at filling stations.

— Those alarm bells are just psychological, the company always meets its obligations. It’s never been the case that we’ve confirmed supplies of some products or other and then not been able to deliver. Added to which, plants never close down completely, and we’ve smoothed out the process of redistributing loads across those facilities remaining in operation. I’m confident that, in market terms, everything’s going to be fine.

— Give us an idea of volumes. How much are you going to be refining this year?

— This year we’re aiming to process about 20.5 million tonnes.

— The refinery processed 29 million tonnes in 1978. Is it likely the plant’s ever going to break that record?

— It just wouldn’t make sense now. You have to understand here that most of that 29 million tonnes was just distilled out of the plant: low-grade gasoline, fuel oil, and gas that was half flared-off. Conversion rate was negligible. You wouldn’t see that today. We set our priorities somewhat differently. Refining oil just to increase production volumes — that’s out the window. The overriding priority now is optimum efficiency.

— You were one of the first in Russia to start producing gasoline with an octane number of 100. How do you see the outlook for this?

— We don’t get involved in direct sales, but orders are growing.

Can you make money out of a refinery?

— Taking a number of factors into account — the completion of the tax manoeuvre, market conditions — are the economics of refining at your plant likely to remain positive?

— I’m confident that oil refining at the Omsk Refinery is going to remain at optimum viability for years to come, regardless of market conditions. The plant today is a high-tech enterprise, moving forward confidently ahead of the entire industry. If we continue keeping a close eye on our costs, investment programmes, and minimising losses, and keep working on energy efficiency, I’m confident our business will remain viable.

— Continuing on the question of the tax manoeuvre: the law included an article on logistical shortcomings at a number of refineries. Are your operations impacted by the plant’s remoteness?

— I can’t say the plant, as a producer of oil products, has been impacted by anything. We invested considerable amounts of money in developing shipment technologies last year, and modernised the Kombinatskaya station, which trains carrying oil products are shipped through. We’re continuing the modernisation of loading racks, thus reducing downtime and shipment times. On which basis, bottlenecks in logistics are being solved.

— In your view, why is Russia’s most important plant located here, of all places?

— The decision on building the plant was taken in 1949, when the Great Patriotic War (WWII) was still fresh in the memory. Refining had to be secured in the east of the country, as far as possible from the western frontier. Initially we were refining oil from Bashkortostan, but by the 60s we were already onto Siberian oil. From that point on it became evident that refining just had to be developed in this region.

The biggest taxpayer in the Oblast

— I’ll just touch on a less pleasant side of modernisation — which is, that as a result of processes being digitised, it’s often accompanied by redundancies. Are you planning any layoffs?

— No, we’re building new facilities, and we need qualified personnel. The plant, the company, are investing more money in developing employees, so they can transition smoothly to new facilities. We take good care of our employees. And I think this is the real key to success — an excellent team, committed to the business and the work it does.

— Let’s take a minute on a — not particularly pleasant — issue for the company. There is a view that after Gazprom Neft took control of the plant, the Omsk Oblast lost a considerable part of its budgetary income. How far is that true?

— It’s a myth. I was working at Sibneft at the time, and have an insider’s view of the situation. There was a typical capitalisation process, the company tried various ways of maximising profit in order to look good on the international markets, and to be valued more highly. And during this time the business did pay uncharacteristically more taxes — but only for two years. Prior to that they’d been really quite modest — around RUB1.5 to two billion. The situation is now much clearer. For example, Gazprom Neft paid more than RUB7 billion into the regional budget in 2017 alone. And leads rankings of the biggest taxpayers year after year.

— There is a view that processing is paying less into the Oblast budget. What do you say to that?

— Working under processing strategy (or so called ‘processing-based scheme’) is typical and one of the most widespread throughout all major international companies. This system is completely transparent and is readily understandable to tax agencies and local government — how much the plant is contributing to the budget every month, regardless of any oil-price fluctuations, tax changes, or other external factors.

— What is the company doing for the Oblast, apart from the tax payments it makes?

— The group is implementing an enormous number of projects throughout the Omsk region. We fund almost 95 percent of all non-governmental investment in the Oblast — restoring streets, building and financing the Avangard HK academy, and promoting good living conditions through our “Home Towns” programme. That’s billions of rubles, every year.

“Ecological oversight” at the Omsk Refinery

— As an Omsk native yourself, do you see any kind of response or understanding as to the scale of your social programmes, on the part of local residents — your acquaintances?

— Understanding happens slowly. Scepticism, which you’ve already talked about several times, is always there. You couldn’t say it’s been completely eliminated — it hasn’t been. But our openness is, already, paying off — despite all the negative comments. We are completely open with inspection agencies, and government bodies. We’ve now signed an agreement on automated environmental monitoring. In other words, we will be the first in the Oblast to tell government “Yes, we’re ready to demonstrate openly that the plant is complying with all standards and requirements.”

—You’re speaking in the future tense. So the logical question — when is this going to happen?

— In 2018 our company, the Ministry of Natural Resources and the Ministry of Communications of the Russian Federation signed an agreement under which our plant became a pilot test-ground for the testing of control technologies and their subsequent wider dissemination throughout the entire industry. We have a programme, and have put together a technical specification which will be submitted to regulators so they can review it and express their opinion. Which we’re currently waiting for. I would point out that we’ve taken on a very serious financial commitment — this isn’t tens of millions of rubles, but significantly more. Added to which, we are, so far, the only enterprise in Omsk to have agreed to this.

— Logically, the state should be financing things like this, not businesses ...

— I don’t agree. If it’s related to a business’s operations, then it should control it. We, for our part, are reducing our environmental impacts through investments like these. We’ve cut these by 35 percent since 2008 and by 2021 will have cut them by a further 28 percent. So that, between 2008 and 2021, the plant’s environmental impacts will have been cut by 60 percent. We’re also supporting the development of a modern environmental monitoring system for the entire region. This spring we handed over a mobile laboratory to the Omsk government, as well as training people to work with it.

— Will it ever be possible to drive home refineries’ environmental safety to the public?

— I’m sure that will happen, although everybody’s different. Our site carries information on our plant’s environmental status. We have an open programme — a communications programme, “Ecological oversight”, in place. We invite local residents— literally, put them on buses and bring them — to the plant. We show them the grounds, stop, people get out, breathe in, sigh and are astonished by how beautiful everything is — with flowers growing, and everything clean and tidy. And we’ll be continuing this programme. Once or twice a month we undertake excursions around the business for various institutes, ministries and educational institutions.

— And the result?

— You’ve no idea. People see what’s being done at the plant and the picture the sceptics once had in their minds just goes away.

Oleg Belyavsky was talking to Alexei Bolshov and Alexei Petrov, TASS.