“This decrease accelerated towards the second half of 2022,” he said. “For example, in the months such as August, September or December, the export volumes slumped twofold or more than twofold compared the same months in 2021.”

DYM found that even before the embargo of the Russian crude and refining product imports into the European Union – that kicked in successively, on Dec 5. and Feb. 5 – the country’s export shipments were decreasing.

“The reason is that [after the onset of the war in Ukraine], many countries and buyers decided to not buy the product,” Varaksin said. “The most important [factor] was that the banks and the logistics providers refused to accept transactions and cargo, so it became more complicated to ship the product and to receive the payments for the product.”

Meanwhile, in the spring of 2022, the EU and the United States implemented sanctions that banned international companies and banks from doing business with or sharing any new technology with Russian state-owned oil majors Rosneft and Gazprom Neft.

Europe was one of the largest buyers of base oils from Russia before Feb. 2022. The continent bought more base oils in the first half than in the second half of 2022.

“Russian supplies provided a key buffer for the Europe when the market was the tightest, during the maintenance of the European refineries in the spring, and when the peak of the season came. Russian loadings helped the market the prices to not go too high,” Varaksin observed.

DYM found that Russian supplies to Europe held around 10% of the total European base oil demand in 2022.

However, Russia completely lost this market since Feb. 5, when the refining products embargo kicked in.

“Now it is not allowed to bring the product to the EU, no exceptions,” Varaksin said. “We have already seen big decrease of supply in January and expect the supplies to hit new lows sooner.”

He expects Russian base oil exports to decline even further this year.

For Russia, another important market was Ukraine, “and of course supplies there have stopped in March 2022.”

“Ukraine imported almost 120,000 tons of Russian base oils annually,” Varaksin observed. “Despite the fact that at least two Ukrainian blenders were destroyed, there is still a demand for base oils in the country. The Ukrainian market now has to bring this material from Europe, making the market more tight, while the Russians have to find new destinations where it can load this volume.”

One such market is Turkey. “Russia almost doubled its supplies to Turkey last year to more than 120,000 tons but the Turkish domestic market is relatively weak, and Russia cannot replace there all of the material meant for Europe. Also, some Turkish vendors ask for approved Group III material,” Varaksin said, adding that they don’t see much potential for bringing in more Russian base oil to Turkey itself, “but there could be some reexport going on, albeit this would be not cost effective.”

For Russia, the non-European buyer with the most potential is Nigeria, according to DYM. Then, Russian base oil could go to Singapore, directly or via Turkey. India or the Latin America have the least potential as buyers for the Russian base oil cargo.

“For Nigeria to buy Russian base oils, the prices need to be much lower compared to the European prices,” Varaksin said. “Nigeria usually buys from Europe, the Middle East and the Baltics. India shipments could be difficult, there is big competition from the Middle East. Singapore was a prospective buyer in 2020 and 2021, where Russia sold around 80,000 and 60,000 tons respectively, but the shipments went down to 12,000 tons in 2022.”

In Latin America, Russian base oil prices can compete with the U.S. exports, and the base oils coming from Russia can be very interesting, having in mind that no Latin American country imposed sanctions on Russia and or any embargo on Russian material,” Varaksin continued.  “However, the challenge will be logistics, as there isn’t any large shipping company that now accepts to deal with Russian base oil cargo shipping.”

Russia has seven base oil refining sites that account for 2.2 million tons of total annual production capacity, according to Lubes’Greases Base Stock Plant Data.

These include Gazprom Neft’s 260,000 tons per year Group I base oil plant in Omsk and Lukoil’s Volgograd plant, which has capacity to produce 260,000 t/y of Group I, 220,000 t/y of Group II and 30,000 t/y of Group III base oils. Other sites that have capacity to produce Group II and III base oils are Tatneft’s Nizhnekamsk plant (90,000 t/y Group II, 100,000 t/y Group III) and Slavneft’s Yaroslavl plant (100,000 t/y Group III).