OREANDA-NEWS. July 15, 2008. TNK-BP support the initiative of the Government on postponing enforcement of new motor fuel standards by 2 years, said Volker Woyke, Vice President, Refining, TNK-BP to the press.

According to him, the timing for transition to the Euro-3, Euro-4, and Euro-5 standards for fuel oil, gasoline, and diesel fuel is very aggressive.

“The industry cannot make all necessary investments in the declared time slot. This transition took 10 years in Europe, whereas Russia is trying to do the same in a very ambitious period of time. Our partners in the industry and we are having discussions and consultations with the Government on choosing a more optimal period. The industry is hardly coping with the task. All this requires investments, and the investing capacities of the industry are limited,” said he.

Mr. Woyke is sure that the oil refining industry will develop and receive additional investments. “TNK-BP is going to invest USD1,5 billion into oil refining in the nearest 5 years. Our products are in high demand in and outside Russia. In our opinion, the demand for diesel fuel will be very high in the years to come, and we have the capacity of producing diesel fuel for all Europe,” added he.

The Vice President noted that currently TNK-BP is refining one third of all oil of the company and is looking for ways to deeper conversion of oil. “We are implementing a project for construction and installation of a vacuum distillation unit in Ryazan (at the Ryazan Refinery – ANI), which will be launched in 2011 to give us chances for deeper conversion of oil. We are also thinking on other projects, in particular, the project for construction and installation of a hydro-cracking in Ryazan,” said he and added that these investments are at the first stage of coordination, which implies selection and definition of technologies.

According to Mr. Woyke, the shareholders of TNK-BP are unanimous in their desire to renew the refining business of the company. He made no comments on the possible impact of the conflict between the shareholders on implementation of the oil refining strategy of the oil company.

Earlier, the idea of deferring enforcement of new standards for motor fuels was supported by a number of major oil companies, in particular, LUKOIL. According to LUKOIL, most refineries are ready for transition to Euro-3 from 2009, but transition to production of gasoline brands meeting the Euro-4 standard is impossible for the absolute majority of refineries and requires their large-scale modernization, which may take 4–5 years with limited investments, involvement of contractors, and purchase of equipment.

Apart from that, LUKOIL suggests considering the possibility of postponing the ban on production of Ai—92 gasoline to 2016–2018. Currently, Ai—92 accounts for more than 50% of the total consumption of automobile gasoline in the Russian Federation. Replacement of Ai—92 with Ai—95 in 2012 will cause losses of USD 2–2.5 billion a year for the Russian oil-refining industry due to the high demand for components required for increasing the octane number of gasoline.

As reported earlier, in his speech at the Federation Council meeting last week, Sergey Shatalov, Deputy Minister of Finance, said that the Russian Federation Government is considering postponement of enforcement of new motor fuel standards by two years. He noted, that the new standards imply differentiation of excises on motor fuel from January 2009.

“Analysis shows that oil refineries are not ready for switching to the Euro-3, Euro-4, and Euro-5 standards next year,” said Mr. Shatalov and added that the Government is going to postpone introduction of the stringent requirements of these standards by two years. Mr. Shatalov noted that approximately 45–50% of all motor fuel currently produced by oil refineries comply with the Euro-2 standard.

In May, the Chamber of Commerce and Industry of the Russian Federation warned about a possible shortage of jet fuel and informed on the beginning of its import due to enforcement of the new standard for it.

The technical regulation “On Requirements to Automobile and Aviation Gasoline, Diesel Fuel, Marine Fuel, Jet Fuel, and Furnace Fuel Oil” approved by the Government in late February 2008 bans production of fuels of the Euro-2 class beginning from 2009, Euro-3 beginning from 2010, and Euro-4 beginning from 2013 and production of Ai—80 and Ai—92 gasoline from 2012.