MOSCOW – Russias sluggish economic growth, projected at just 1.3 percent for 2013, is delaying the countrys base oil modernization projects, an industry summit heard.

Russias industrial production is expected to stagnate in 2013. Initially forecast at 3.6 percent, Russias gross domestic product growth projections were recently lowered by the economics ministry to 1.8 percent for this year. A week after that announcement, the European Bank for Reconstruction and Development forecast 1.3 percent GDP growth in Russia in 2013.

Prognoses by the economic development and energy ministries sometimes are too optimistic, Tamara Kandelaki, head of Moscow-based consultancy InfoTEK, said at RPIs Lubricants Russia conference here Nov. 13. For January through September of 2013, Russian exports decreased 1.4 percent compared to the same period last year, while imports increased by 3.4 percent.

The federal budget is heavily dependent on crude oil, natural gas exports and the crude oil price fluctuation on the global marketplace. After four months of increases, global crude oil prices have been stagnating since September, Kandelaki said.

Many observers believe that the slowdown is a result of the Russian governments lack of structural reform, saying that poor governance, weak rule of law, and state-owned companies assaults on competition undermine Russias business climate and cause capital flight.

Base Oil Delays
With economic recession in Europe and competition from Asia, the downstream sector is experiencing tough times, according to InfoTEK. All large Russian oil companies have altered the expected finish dates of their base oil production modernization programs.

Rosneft has pushed back to the end of 2015 plans to discontinue its 200,000 tons per year API Group I base oil production in Novokuibishev and replace it with 400,000 tons per year of Group II production.

Tatnefts Taneko refinery in Nizhnekamsk, which is developing a 100,000 t/y Group III and 90,000 t/y Group II base oil production expansion, wont be ready to stream until 2015. Initially the project was expected to finish by the end of 2013.

Recently, a test Group III base oil stream was started in Rosnefts Angarsk refinery, which is expected to reach its full capacity of 32,000 t/y by 2017, around the same time when the company plans to start up its 128,000 t/y Group II base oil plant, and to discontinue production at its current 180,000 Group I base oil plant.

Rosnefts Omsk and Slavnefts Yanos, as well as Lukoils Volgograd and Perm base oil production modernization wrap ups will be pushed back further to the beginning of the next decade, Kandelaki said.

At Omsk, Rosneft expects to stream 150,000 t/y of Group II and 50,000 t/y of Group III base oils by 2020, while Slavneft expects Yanos additional 10,000 t/y of Group I and 100,000 t/y of new Group III base oil production will also not be ready until 2020.

Lukoil has scheduled its major lubricants facilities in Perm and Volgograd to decrease at least half of their Group I capacity. Volgograd expects its current 30,000 t/y Group III base oil capacity to have an additional 210,000 t/y by 2022. Perms new 338,000 Group III base oil plant will be ready around the same time, according to InfoTEK.

Slavnefts Yanos refinery is owned by a joint venture between Gazprom Neft and TNK-BP, a company acquired by Rosneft earlier this year.

By 2020, Russias Group I production is expected to decrease to 1 million t/y, from the current 2.2 million t/y, Kandelaki said. New Group II capacities will reach 1.1 million tons per year, while current Group III base oil capacities are expected to expand to 492,000 tons per year by 2020.

Lukoil is still the leading lubricants company in Russia. In 2012, LLK International, the lube arm of Lukoil, held a 49 percent share of the market, selling 1.1 million tons of base oil and lubricants, Kandelaki said. It was followed by Rosneft, which held a 20 percent share with 460,000 tons sold, and Gazprom Neft, with a 17 percent share and 400,000 tons of products sold. Three smaller lubricants marketers were Bashneft, with a 7 percent share and 150,000 tons of sold products last year, followed by TNK (5 percent and 120,000 tons) and ForteInvest (2 percent and 40,000 tons).