Surgut Doubles Upgrade Cost for Biggest Refinery to $2Bln

ST. PETERSBURG -- Surgutneftegaz, the country's fourth-largest oil producer, said Tuesday that it would invest at least $2 billion in its long-delayed Kirishi refinery upgrade, more than doubling the project's initial cost.

Surgut had previously estimated the cost of the reconstruction, which includes building hydrocracking and catalytic cracking units to raise output of light oil products such as gasoline and gas oil, at $800 million.

In April 2007, a Surgut source said the company was going to sign a contract worth more than $1 billion with a general contractor.

Vadim Somov, general director of the 400,000-barrel-per-day refinery, told reporters Tuesday that building the hydrocracking unit alone would cost the company $2 billion.

Work is 30 percent complete, with the aim being to start operating the unit at the end of 2009, he said.

The hydrocracking unit is expected to increase the plant's refining depth to 75 percent from the current 54 percent.

In 2011, the refinery plans to start building a catalytic cracking unit, to be completed by 2015. Refining depth is expected to reach 90 to 92 percent by that time, Somov said.

Surgut, which produced 1.3 million barrels per day last year, is one of the country's most secretive companies. It does not publish results under international accounting standards, and since 2003 it has declined to disclose its ownership structure.

Kirishi, Surgut's only refinery and the country's biggest oil processing plant, has been postponing major reconstruction work since the mid-1990s. Somov also reiterated Surgut's plans to build a second refinery with capacity of 240,000 bpd in Kirishi, near St. Petersburg.