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Agrochemistry and oil refining in Russia
S.D. TurgunovGeneral Director
Russian methanol market
2
0
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1000
1500
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2500
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3500
4000
4500
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2008 2014 2015 2016 2017
kt
NZSP Ammoni Novatek YurkharovneftegazAcron Angarsk NKhK Nevinnomysski AzotNAK Azot Shchekinoazot SibmetakhimTogliattiazot Metafraks
Methanol production in Russia
3
3998 3978 4201 4301 4301 9 plants were produced methanol in Russia in
2016
Production potential in Russia is growing both due to commissioning of new plants (238 ktpa at Ammoni) and reconstruction of the existing plants
Reconstruction of the methanol plant at Metafraks continued in 2016; its capacity was increased to 1 mln 100 ktpa. After completion of the second stage of the reconstruction, capacity of the company will increase by 10% to 3.37 t/d (1,200 ktpa)
Russian average capacities utilization, %
2014 2015 201691 89 87
Methanol production capacities in Russia
3 619 3 644 3 716
2 1062 386 2 204
0
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1000
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3500
4000
2014 2015 2016
kt
production Consumption
Balance of methanol production and consumption in Russia
Production capacities are increasing, but the utilization factor is decreasing in Russia on average.
4
Consumption and supplies of methanol in Russia
Formaldehyde (formalin, UFC)
37,7%
Isoprene12,3%
MTBE19,3%
Oil and gas industry
14,9%
TAME2,2%
Chemistry3,7%
Acetic acid4,2%
Others5,7%
Structure of methanol consumption in Russia, 2016
Demand of the internal market is fully met by the internal production resources; no import.
Share of commercial methanol (supplies to internal market) is over 40% of the total production volume in recent years.
Due to a decrease in the demand from gas plants in 2016, supplies to Russian consumers reduced by 195 kt and made 1 mln 490 kt.
715 kt of methanol or 19% of the total volume of produced product was processed directly by manufacturing plants.
Russian structure of methanol consumption is different from the global one. Consumption of methanol for formaldehyde on the global market is only 30%; about a half of the consumed methanol in Russia is accounted for methanol (including isoprene production).
Over 30% of methanol in the world is consumed as a fuel either directly or indirectly through MTBE/TAME. Methanol is not used as an alternative fuel in Russia and the share of oxygenates in the structure of methanol consumption is about 20%.
1 513 1 266 1 514
678694
714
1 428 1 6831 490
0
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4000
2014 2015 2016
kt
Commercial Internal consumption export
Structure of distribution of methanol produced in Russia
5
Methanol supplies. Export
Finland52%
Kazakhstan2%
Slovakia12%
Poland15%
Romania6%
Belarus2%
Ukraine1%
Germany4%
Lithuania4%
Others2%
Export is regulated by the internal demand
Marked growth in demand at a small increase in production resulted in a sharp reduction of export in 2015 (minus 247 kt)
Decrease in methanol consumption by Russian consumers in 2014 and 2016 was the reason for export growth to 1,5 mmt
Main countries receiving Russian methanol in 2016
Belgium
Great Britain
Sweden
Denmark
Poland
NetherlandsOthers
Finland(consumption)
140 kt(9%)
a half of domestic methanol is supplied to customers not directly, and through the ports of Finland where methanol needs to be brought by rail
Significant part of methanol supplied from Russia to Finland (660 kt from 800 kt in 2016) is transited to other countries. Russian methanol is also transited through Slovakia.
42%
35%41%
0%5%10%15%20%25%30%35%40%45%
1,11,21,21,31,31,41,41,51,51,6
2014 2015 2016
mmt
Export Share of export in production
Methanol production projects in Russia
6
EKOZON Ltd .(1.6)2025
MetaSev(1.65)2020
BGKhK(1.7)2025
Russian Investments
Shchekinoazot(0.45)2018
Shchekinoazot(0,5)2021.
OTEKO(3.5)2021
RICOAL(1.9)2021MTO
TPGK(1.3)2023
Mangazeya(0.1)2021
UralMethanolGroup(0.6)2020
YaTEK(1.7)
SUEK and Marubeni
YatEK(1.7)
Mitsubishi Corporation RUS
(1)2025
ESN(1.2)2021
NKhG(1.8) 2021
17 projects altogether with the design capacity of 20,7 mmt excluding projects, the capacity of which is not announced yet (Russian Investments, SUEK and Marubeni)
2,2 2,12,3 2,3 2,3
1,5
1,9
2,3
0,0
0,5
1,0
1,5
2,0
2,5
LeningradRegion
ArkhangelskRegion
Rostov Region KrasnodarTerritory
PrimorskyTerritory
SakhalinRegion
SverdlovskRegion
Tula Region
USD/mmBTU
Russian gas prices regulated by Federal Tariff Service
7
RICOAL
OTEKO,Taman
Mitsubishi,Sakhalin
NKhG,Kozmino
UralMethnolGroup, Nizhni Tagil
Shchekinoazot,Pervomayski
Russian Investments
BGKhK, Ust Luga
NGSK, Ust Luga
Ekozon,Pikalevo
Mineral fertilizers
8
9
Balance of production and consumption of mineral fertilizers in Russia(based on 100% nutrient materials)
Production and consumption of mineral fertilizers in Russia
Type structure of mineral fertilizers production in Russia, 2016
18,319,6
19,9
20,7
5,3 5,4 4,6 5,580,7%
86,4% 86,6%86%
77%78%79%80%81%82%83%84%85%86%87%88%
0
5
10
15
20
25
2013 2014 2015 2016
mmt
production Consumption Utilization of capacities in Russia
Main trends of the Russian mineral fertilizers market:
Russian market of mineral and chemical fertilizers is consolidated:
• Main players in the segment of nitrogen and phosphoric fertilizers: MCC EuroChem, Uralchem, PhosAgro and Acron.
• Main player on the ammonia market is Togliattiazot – capacities of the plant make 22% of the Russian ammonia production volume
• Key player on the carbamide market in Russia is Nak Azot – 17% of the Russian carbamide production volume
Market of mineral fertilizers grows by 4% on average in 2016.
phosphoric fertilizers 17%
nitrogen fertilizers45%
potassium fertilizers 38%
2015 2016Phosphoric fertilizers 7% 9.8%Nitrogen fertilizers 5.30% 8.5%Potassium fertilizers -4.10% -3.8%
Growth rates of mineral fertilizers production by types
The only segment where the production is dropping is the segment of potassium fertilizers. This can be explained by the fact that Uralkali reduced the capacities because of the accident at the Solikamsk-2 mine at the end of 2014. The volume of production did not restore.
(based on 100% P205)
(based on 100% N)
(based on 100% K2O)
China27%
Brazil17%
India10%USA
6%
Indonesia6%
Poland5%
Malaysia5%
Others24%
Brazil15%
Ukraine15%
China10%
Estonia6%UAE
5%Turkey
5%
India4%
Others40%
10
13,1
14,3
15,415,3
71%
73%
77%
74%
68%
69%
70%
71%
72%
73%
74%
75%
76%
77%
78%
11,5
12,0
12,5
13,0
13,5
14,0
14,5
15,0
15,5
16,0
2013 2014 2015 2016
mmt
export Share of export in production
Export of mineral fertilizers from Russia
(based on 100% nutrient materials)
Limited volume of the domestic market determines the export orientation of Russian manufacturers (steadily over 70% in production)
Profitability of production and competitiveness of the Russian product, including foreign markets, grow in Russia due to the expenditures in roubles
Brazil (21%), China (11%) and USA (8%) are the key markets for Russian fertilizers
Brazil28%
USA13%
Ukraine7%
Turkey5%
Peru4%
Estonia3%
India3%
Others37%
Export of nitrogen fertilizers from Russia Export of potassium fertilizers from Russia Export of mixed fertilizers from Russia
11
Prices for mineral fertilizers
Reduction of global prices is mainly determined by the decline in demand from the key consuming regions (China, Latin America, etc.). Rates of decline for different types of fertilizers are from 15% for ammoniac saltpeter to 35% for potassium fertilizers
In the conditions of reduction of global prices for mineral fertilizers, Russian manufacturers increase the production volumes due to the weak rouble and continue putting new plants into operation
Average prices for phosphoric fertilizers, $/t 2015 2016 Annual changeDiammonium phosphate, FOB USA 458 345 -25%Monoammonium phosphate, FOB Baltic Sea 459 338 -26%Triple superphosphate, FOB Tunisia 303 291 -4%NPK 16-16-16, FOB CIS countries 355 283 -20%
Average prices for potassium chloride, $/t 2015 2016 Annual changeSpot FOB Baltics 288 232 -19%Spot FOB Vancouver 385 291 -24%
Average prices for nitrogen fertilizers 2015 2016 Annual changeAmmonia, FOB Yuzhny 387 236 -39%Carbamide, FOB Yuzhny 271 199 -27%Аmmoniac saltpeter, FOB Black Sea 222 165 -26%Carbomide-ammonium mixture , FOB CIS countries 198 136 -31%
12
Projects
Apatite concentratePlant Capacity increase, kt Commissioning
Kovdorskiy GOK (EuroChem) 441 Stage I - 2015 (completed) Stage II - 2018 North-Western Phosphorous Company (stage II) (Acron) 1,000 2018 (possibly 2017)Apatit, Kirovsk (PhosAgro) 800 Completed
Total 2,241
Potassium chloridePlant Capacity increase, kt Commissioning
EuroChem VolgaKali Potash (stage I) 2,300 2018Uralkali, Berezniki (extension of Solikams-3) 600 2017Uralkali, Berezniki (Ust-Yayva area + Solikamsk-3) 2,800 2025Verkhnekamsk Potash Company, Berezniki/Talizky GOK (Acron) 1,000 2021EuroChem Usolsky Potash Plant (stage I) 2,322 2018
Total 9,022
AmmoniaPlant Capacity increase, kt Commissioning
Ammoni, Mendeleyevsk 455 (717 w/o methanol) CompletedMetafraks, Gubakha 450 2020Nemanazot, Kalinigrad Region 1,500 n/aKuybyshevazot, Togliatti 489.1 2017Acron, Veliky Novgorod 700 2016 (completed)Shchekinoazot 135 2017Novomoskovsky Azot (EuroChem) 28 completedPhosAgro Cherepovets (PhosAgro) 760 2017Integrated mining and chemical plant in the Republic of Sakha 200 2022 Integrated mining and chemical plant in the Khabarovsk Territory 1,000 n/aAzot, Kemerovo (SDS Azot) 77 n/aMCC EuroChem, Kingisepp 1,000 2018Nakhodka Mineral Fertilizers Plant 1,100 2019-2021
Total 7,894
13
ПроектыPlant Capacity increase, kt Commissioning
Ammoniac saltpeterAngarsk nitrogen fertilizer plant (SDS Azot) 270 2017Ammoni, Mendeleyevsk 380 completedNovomoskovsky Azot (EuroChem) 340 completedAzot, Kemerovo (SDS Azot) 500 n/aDorogobuzh (Acron) 400 n/a
Total 1,890Carbamide
Novomoskovsky Azot (EuroChem) 100 Under revampingAmmoni, Mendeleyevsk 717.5 completedAcron, Veliky Novgorod 150.2 Under revampingPhosAgro Cherepovets (PhosAgro) 500 2017Kuybyshevazot, Togliatti 547.5 2019Nemanazot, Kaliningrad Region 1,100 n/aMetafraks, Gubakha 560 2020East Siberian GKhK 500 2022 (?)Togliattiazot 206.5 2020Mineralnie udobrenia, Perm 275 (increase) 2019Azot subsidiary of URALCHEM 319 2019
Total 4,976Calcium carbonate-ammonium nitrate
KChKhK subsidiary of URALCHEM 600 (increase) (?)Mixed mineral fertilizers
Fosforit (EuroChem) 150 (?)Dorogobuzh (Acron) 110 2019Nevinnomyssky Azot (EuroChem) 60 (NK) 2018EuroChem Belorechenskie mineralnie udobrenia 500 (NPK) 2019 (designing)Acron 60 (azophoska) 2016 (completed)Metakhim (PhosAgro) 105/135 (wet-process phosphoric acid/NPK) 2018 (favorable conclusion of expert review)
Total 1,015
Ammonium sulphateEuroChem Belorechenskie mineralnie udobrenia 55 (NS) 2017Kuybyshevazot (ammonium sulphate-nitrate) 385 2018Kuybyshevazot/Trammo AG 130 2017PhosAgro Cherepovets 300 2017
Total 870
Russian oil refining
Rosneft26,2%
Lukoil15%
Gazprom neft11,2%
Surgutneftegaz6,6%
Bashneft6,6%
Slavneft5,3%
Mini-refineries3.3%
Taneco3,1%
Taif NK3%
Others20%
Volumes of oil production and primary oil refining in Russia
15
1,2% 1,3% 1%0,6%
1,4%
2,5%2,6%
3,5% 3,4%
5,2%
-2,1%-1,2%
505 511 518 523 527 534 548
250 257 265 275 289 283 279
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
0
100
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600
2010 2011 2012 2013 2014 2015 2016
mmt
Rate of oil production growthRate of primary refining growthOil productionPrimary oil refining
Rate of oil production growth is restoring after a decline in 2014 and makes 2.5% in 2016.
Russian primary oil refining continues dropping from 2015. Refining is more sensitive to oil price collapse than production because the margin of Russian refineries is decreasing with the fall of oil prices.
Structure of Russian plants by primary oil refining volumes in 2016
76 77 75 73
45 45 42 42
31 32 32 3120 19 19 1921 22 19 1815 15 15 15
39 47 47 48
0
50
100
150
200
250
300
350
2013 2014 2015 2016
mmt
Прочие Antipinsky Refinery TAIF TANEKO
Mini-refineries Slavneft Bashneft Surgutneftegaz
Gazprom neft LUKOIL Rosneft
275 289 283 279
Dynamics of primary oil refining volumes in Russia
RN Komsomolsk RefineryRN Tuapse RefinerySyzran RefineryNovokuibyshevsk RefineryKuybyshev RefineryAchinsk Refinery VNKAngarsk NKhKRyazan RefinerySaratov Refinery
16
Refineries in Russia. Volume of primary refining and annual growth rate by plants in 2016
Rosneft73,2 mmt
6,2 mmt
9,8 mmt6,3 mmt7,1 mmt6,1 mmt
7 mmt
9,2 mmt15,3 mmt5,9 mmt
-11%2%
-2%
-14%-1 %12 %
2 %-5 %-4%
Bashneft(a Rosneft company
from 2016)18,3 mmt
Bashneft Novoil subsidiary
Bashneft Ufaneftekhim subsidiary
Bashneft UNPZ subsidiary
6,5 mmt
7,8 mmt
4 mmt
-1%
-19%
LUKOIL
LUKOIL Volgogradneftepererabotka
LUKOIL PNOSLUKOIl UNPLUKOIL Nizhegorodnefteorgsintez
1,1%
12,8 mmt12,1 mmt2,85 mmt
14,08 mmt
1,4%7,7%
-19%
-4%
41,8 mmt
Gazprom neft Gazpromneft Omsk RefineryGazpromneft Moscow Refinery31,1 mmt
20,5 mmt
10,7 mmt
-3%
-2%
Surgutneftegaz Kirishinefteorgsintez 18,5 mmt -1%18,5 mmt-1%
GazpromGazprom dobycha AstrakhanGazprompererabotka, Surgut ZSKGazprompererabotka, Urengoy ZPKTGazprom dobycha Yamburg
2,1 mmt2,8 mmt
0,3 mmt0,03 mmt
5,3 mmt
-4%
-13%4%
1%
-6%
-3%
-5%
-0,1%
-2%
17
Refineries in Russia. Volume of primary refining and annual growth rate by plants in 2016
Gazprom neftechim Salavat
6,5 mmt
Krasnodar Refinery KEN
2,1 mmt
TAIF NK
8,3 mmt0,4%
26%
-1%
ForteInvest -18% Orsknefteorgsintez 4,6 mmt -18%
NNK NNK Khabarovsk Refinery 4,7 mmt12% 12%
4,6 mmt
4,7 mmt
Slavneft Slavneft YANOS 15 mmt -2%-2%
NOVATEK
4%
15 mmt
6,9 mmt«NOVATEK Ust Luga 6,9 mmt 4%
Afipsky Refinery Yaysky Refinery Antipinsky Refinery
Mariysky Refinery Novoshakhtinsk Refinery
TANECO
Ilsky Refinery Mini-refineries
6 mmt
4%
2,8 mmt -6% 7,8 mmt -4%
8,7 mmt 1%
1,6 mmt -5% 2,7 mmt 4,4 mmt 39%-6% 9,1 mmt 9%
4%
-2%
2%Independent refineries in Russia. Volume of primary refining and
annual growth rate by plants in 2016. 41 mmt
Rosneft27%
Lukoil18%
Gazprom neft11%
Independent refineries
11%
Bashneft9%
Surgutneftegaz9%
Slavneft5% Others
10%
Market of main oil products in Russia
18
38,7 38,3 39,2 40
35,5 35,7 35,4 35,1
0
10
20
30
40
50
60
70
80
2013 2014 2015 2016
mmt
Internal consumption Production
Balance of production and consumption of motor gasoline in Russia
72,0 77,3 76,1 76,3
33,2 31,8 31,1 32,5
0
20
40
60
80
100
120
2013 2014 2015 2016
mmt
Internal consumption Production
Balance of production and consumption of diesel fuel in Russia
Rosneft26%
Lukoil19%Gazprom
neft18%
Bashneft10%
Slavneft7%
Surgutneftegaz7%
Gazprom6%
Others7%
Structure of motor gasoline production in Russia by plants, 2016
incl. 1% - mini-refineries
Structure of diesel fuel production in Russia by plants, 2016
incl. 1% - mini-refineries
19
Upgrading
41%20% 15% 6% 6%
35%
17%11%
9% 2%
24%
63%74%
84% 93%
0%
20%
40%
60%
80%
100%
120%
2012 2013 2014 2015 2016
Class 5 Class 4 Class 3 and lower
Structure of motor gasoline production by ecological classes
66%48%
34%17% 15%
9%
11%
8%
10%0,3%
25%45%
58%73%
85%
0%
20%
40%
60%
80%
100%
120%
2012 2013 2014 2015 2016Class 5 Class 4 Class 3 and lower
Structure of diesel fuel production by ecological classes
28,5% 28,1% 28%27,1%
25,2%
20,3%
19%
21%
23%
25%
27%
29%
2011 2012 2013 2014 2015 2016
Yield of oil residue per 1 tonne of refined feedstock
70,6% 71,1% 71,4%72,3%
74,2%
79,2%
66%
68%
70%
72%
74%
76%
78%
80%
2011 2012 2013 2014 2015 2016
Oil conversion ratio in Russia
0
2 000
4 000
6 000
8 000
10 000
12 000
0100200300400500600700800900
1000
2014 2015 2016 2017
RUB/tRUB/t.
Subsoil tax rateExcise tax for gasolineExcise tax for diesel
Dynamics of cost of Urals oil and Russian export duty
Tax maneuver. Redistribution of tax burden
01020304050607080
0100200300400500600700800900
2013 2014 2015 2016 2017
RUB/$s/т
Level of prices for URALS crude oilExport tax for crude oil
-9%
-48%
-18%
22%
-13%
-68%
-26%
7%
-80%-70%-60%-50%-40%-30%-20%-10%
0%10%20%30%
2013 2014 2015 2016 2017
Growth rate of URALS crude oil pricesGrowth rate of export tax for crude oil
2013 2014 2015 2016 2017
Limit oil export tax rate 60% 59% 42% 42% 30%
Dynamics of subsoil tax and excise tax on motor fuels
Main characteristics of Tax Maneuver
Reduction in rates of export custom duties for crude oil and oil products
Increase in the base rate of subsoil tax for commercial oil
Reduction in excise taxes for motor fuels to prevent sharp rise in prices (in the context of subsoil tax increase)
Goal of the maneuver is to reduce the budget dependence on the oil prices and mitigate the effect of their fall for the oil industry
Rates of subsoil tax on the left axis
21,021,522,022,523,023,524,024,525,025,5
2014 2015 2016
KRUB/t
Motor gasoline, average price of domestic market
Diesel fuel, average price of domestic market
Average price for motor fuels on the Russian domestic market
Russian average export price for motor fuels
0100200300400
500600700
2014 2015 2016
$/t
Motor gasoline, average export priceDiesel fuel, average export price