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. Last Updated: 07/27/2016

Yukos Opens Refinery, Eyes China




STREZHEVOI, Tomsk Region -- Yukos launched a high-technology mini- refinery Thursday that will process about 200,000 metric tons of oil per year for the needs of the Tomsk region in western Siberia.


And Yukos's top manager, Mikhail Khodorkovsky, said the oil company plans to double its 500,000 tons a year of railway shipments of crude and oil products to China from the nearby Achinsk refinery.


The new Strezhevoi refinery is 100 percent owned by Yukos-controlled Eastern Oil Co., or VNK, a subsidiary of Tomskneft. The products will be retailed by Yukos Refining and Marketing company. Yukos managers say the $20 million utility will pay for itself in just 2 1/2 years.


"The refinery has been under construction since 1994," said Malcolm Douglas, a manager with Petrofac International engineering company, which supplied equipment to the refinery. "The modules were assembled in the U.S. and shipped to Russia," he added.


The use of crude supplied by Tomskneft and the minimal transport charges will mean the cost of the refinery's oil products will be half of those delivered to the region, Yukos said.


Ninety-two octane gasoline costs about 6 rubles per liter, while diesel trades for 5 rubles, local drivers said.


Yukos is also mulling plans with China National Petroleum Corp. and Russian oil pipelines operator Transneft for the construction of a crude pipeline to China, Khodorkovsky said.


The line would be able to carry about 15 million to 20 million tons of oil per year and would stretch from the eastern end of Transneft's system at the Sidanko-affiliated Angarsk refinery.


Yukos and CNPC have signed a protocol to start a feasibility study for the 2,300 kilometer pipeline in March. The project would require investments of between $1 billion and $3 billion, Khodorkovsky said.


Yukos plans to use crude produced by Tomskneft for China deliveries. The oil producer harbors proven crude resources of about 400 million tons, the Yukos boss said.


Tomskneft produced about 10.5 million tons of crude in 1998.


Yukos and CNPC have also agreed on crude swaps of 1 million tons within the frames of the protocol. CNPC's Kazakh subsidiary Aktobemunaigaz was supposed to ship its crude to the Yukos-affiliated Novo-Kuibyshev refinery, while Yukos was to provide equivalent volumes at the Far Eastern port of Nakhodka. But, because of limits on Russian oil exports, the scheme has not been realized this year even though the volume of oil produced in Kazakhstan transhipped through the federation for export has increased, Khodorkovsky said.


The allocation for Kazakh oil in the Transneft system has grown from 7 million tons to 10 million tons per annum since the beginning of the year, according to Energy Intelligence Group. Last year, Kazakhstan transhipped about 3.5 million tons of oil through Russian pipelines.


"For every million tons [not exported], Russia loses about $50 million," Khodorkovsky said. And the Fuel and Energy Ministry is contributing to the losses by letting Kazakhstan use its pipeline, he added.


Analysts are skeptical about Yukos's plans.


"There are great doubts that Yukos could increase its capital expenditures so quickly," Vladimir Nosov, an analyst with Fleming UCB investment bank, said. "In the first half of 1999 the company invested only 792 million rubles [$31 million], or just 28.6 percent of what it invested in the same period last year in ruble terms," he added.


The oil company has vast debts. According to analysts, Yukos has to pay off about $587 million in the second half of 1999, while the company's total liabilities amount to roughly $1.8 billion, including VNK, or 38 percent of all the vertically integrated oil companies' total debts as of July 1.