Is CEO of Rosneft interested in buying Mazyr refinery?
For almost two months, Belarusian oil refineries have been on a “starvation diet”, their capacities have been loaded at the optimum minimum - about 16 thousand tons per day, with the potential being twice as high.
In order not to stop the refineries in the context of protracted negotiations with the five largest Russian oil companies, and the ongoing search for the best alternative, Minsk had to sacrifice its own oil exports (Belorusneft produces about 1.7 million tons of oil per year), as well as urgently redirect oil from the Siberian subsidiary of Belorusneft, Yangpur company (its production last year exceeded 220 thousand tons) to the Belarusian oil refineries, and even resorting to the extraction of process oil.
Oil time crunch
The Belarusian government hopes that small Russian oil companies will show interest in oil supplies to Belarus, to which Transneft has now opened a “pipe” by decision of the Russian leadership. At least from February 15 to 23, Transneft will accept applications for the March pumping of oil to Belarus. The Belarusian side has not yet reported receipt of such applications.
But even if volunteers to appear, it is already obvious that the Belarusian refineries will have to forget about the annual processing of not only 24 million tons, which is stipulated by the balance with the Russian Federation for 2020, but also about the optimal loading regime of 18 million tons.
A significant reduction in refining by domestic refineries is inevitable in any case, with the continuation of the tax maneuver in the oil industry by the Russian Federation, and Moscow’s unyielding position to make a discount on the price of oil delivered to Belarus.
It should be noted that the average price of imported Russian oil in 2019 amounted to about $ 370 per ton for Belarus, which, according to the Belneftekhim state concern, is on average 20% lower than the world price. In 2020, as expected, this discount will be 15-17%.
A forceful solution to the problem - getting oil to the balance of 2 million tons per month from the transit “pipe” is a risky step for Minsk, although Lukashenka threatened to do it the other day. It is clear that it will be difficult for Russian companies to redirect rather large volumes of oil (about 50 million tons per year) from the Belarusian Druzhba pipeline to alternative routes, however, they have such opportunities. Therefore, if Minsk takes up the oil “lever”, there is a risk of losing even more, and there are no guarantees to achieve the desired result.
There is only one way out - to try to agree. This is precisely what prompted Lukashenka’s desire to meet with the CEO of Rosneft, the largest oil producing company of the Russian Federation, Igor Sechin, and get “complete clarity” regarding their future plans on working in Belarus.
Rosneft is a leading supplier, last year the company delivered about half of all oil to the Belarusian refineries (in 2019 they processed 18 million tons).
“I think, taking advantage of the fact that we have known each other for a long time, you can give me some hints, and we can agree on our further cooperation,” Lukashenka said.
“Answering your question, what to do next, Mr. Lukashenka, we must work together, of course. We are constructive. I am glad that I have the opportunity to discuss this topic with you,” Sechin said at a meeting with Lukashenka in Minsk on February 18 (cited by BelTA).
Sechin at the same time drew attention to the fact that Rosneft is one of the largest investors in the Belarusian economy. “We are participants in the share capital of the Mazyr Oil Refinery, we have a network of gas stations in Belarus, it is small - 36 gas stations are operating,” he said.
Sechin’s interests in Belarus
It should be noted that the composition of the shareholders of the Mazyr Oil Refinery formally changed in 2013. After that, the owners of Slavneft, which owns a 42.581% stake in the Mazyr Oil Refinery, began to use Rosneft on an equal footing (instead of TNK-BP; the state-owned Rosneft consolidated 100% of its shares), and Gazprom Neft. Following this, information appeared about Rosneft’s intention to buy the Mazyr Oil Refinery. And not without reason: after the arrest of the Uralkali CEO Vladislav Baumgertner by the Belarusian authorities in 2013, CEO of Rosneft Igor Sechin managed to thwart the intentions of the Russian government to reduce oil supplies.
Probably, as a sign of gratitude, the Belarusian authorities at the end of 2013 announced their readiness to sell a state share in the Mazyr refinery (42.76% of the shares), as well as a state share (98.9%) of the owner of a 12.252% stake in the plant - MNPZ plus LLC, has its entire government stake - 55.01% of the shares. The interest in the asset was then shown by two Russian companies - Gazprom Neft and Rosneft. Moreover, the Belarusian government itself issued an invitation to Rosneft to participate in the privatization of the Mazyr Oil Refinery, but with the condition to increase oil refining to 20 million tons per year by 2020 at the Mazyr Oil Refinery (at that time the Mazyr Oil Refinery processed about 11 million tons).
However, Rosneft’s public reaction to this proposal did not follow - it is not clear whether this unexpected proposal cooled the interest of the company, or whether the global oil player had other priorities. But who knows how the situation could develop in the foreseeable future. Moreover, it is doubtful that the ambitious Rosneft has lost interest in the Mazyr refinery, which for it is both a consumer of the supplied oil, and a competitor in export markets.
Upon completion of the tax reform in the oil industry, by 2024 Russia will completely zero export duties on oil and oil products, which will force Belarusian refineries to buy Russian oil at a world price. In fact, Belarusian refineries found themselves in this situation already at the beginning of 2020.
Although the price of the Russian oil did not rise to the world level, nevertheless, the Belarusian side refused point-blank to buy it because of bonuses for the Russian oil companies at $ 10 per ton. In the absence of a clear, well-thought strategy in advance, the Belarusian refineries appeared the hostages of the situation.
Time will tell if the head of Rosneft will help Minsk cope with these problems. If - yes, then it is not clear what price Minsk will have to pay for this.
In this regard, we recall that not very long ago, Rosneft was going to become a general supplier of oil to Belarus, and also organize gas supplies for Grodno Azot, the largest Belarusian gas consumer (consumes about 2 billion cubic meters per year). At that time, Rosneft wanted to break Gazprom’s monopoly on gas supplies to Belarus and planned to switch some of the supplies to itself.
Again, time will tell whether these projects in Belarus remained relevant for Sechin.
Tatsiana Manianok, “Our opinion”