The start of ULSD exports to the Black Sea and Med markets via Russia’s South pipeline is not a prelude to massive upgrading investment and soaring diesel production, according to ESAI Energy’s newly published CIS Watch, an outlook on Russia’s refined product markets. In December, the first ULSD will be exported from the new South pipeline, Russia’s Black Sea counterpart to the North pipeline used to export ULSD to Northwest Europe. Initially, the South pipeline will transport 100,000 b/d of ULSD, less than one-third of what the North pipeline transports. But the South pipeline is unlikely to be extended further north or increase capacity anytime soon.

The CIS Watch report describes the progress of upgrading investment at refineries that export from Black Sea ports. With rare exceptions, the dozen refineries in this area have failed to invest in cracking and coking capacity. For example, completion of the hydrocracker at Rosneft’s Tuapse refinery is at least two years away. In the meantime, what could be Rosneft’s flagship exporting refinery will remain the country’s biggest teapot. Upgrading investment at Rosneft’s Samara and Saratov refineries remain even lower priorities.

“The minimalist approach to investment at Russia’s Black Sea refineries is in stark contrast to Northwest Russia,” comments ESAI Energy’s Andrew Reed. “Further north, refineries continue to add hydrocracking and other units that will enable them to export more middle distillate targeting Northwest Europe. Meanwhile, Black Sea refineries have mostly added vacuum units, the minimum needed to stay viable. There will be a trickle of new cracking and coking projects, but very few will be completed before the 2020 introduction of IMO regulations that will stimulate greater diesel use at the expense of fuel oil.”
Source: ESAI Energy