‘Romashkino gives up to 15m tonnes of light oil, but how long will it last?’
What impedes Tatarstan from building a plant to process highly-viscous oil and why we still need oil refineries
Tatneft made a historic decision to design a factory to process highly-viscous oil, which had been long overdue in the republic, precisely 10 years ago. But the factory remained just on paper: Tatarstan’s petrochemists have built TANECO and its light oil processing units over these years. In his op-ed column written for Realnoe Vremya, economist Albert Bikbov explained why heavy oil production and processing was the future of Tatarstan and a factory would be necessary sooner or later considering its huge reserves and gradual exhaustion of light oil despite risks and a high cost of sour crude oil production and processing that have restrained the Tatarstan oil company during those years.
“It is hard to produce and process heavy oil due to its specifics”
Tatneft’s decision to design factories to process highly-viscous oil was, of course, correct because Tatarstan has a lot of reserves of this oil — from 1,5 to 7 billion tonnes by different estimates. Consequently, to have the oil “Klondike” at hand and not use it would be a crime. Highly-viscous oil has been produced in Tatarstan for probably 20 years. It all began with a small production in Ashalchin oil field, then this topic started to gradually develop, and in the end, 2,735K tonnes of ultra-viscous oil was produced in 2019.
But we should keep in mind that it is hard to produce and process heavy oil due to its specifics. It is highly-viscous and this is why it isn’t pumped out on its own. To produce it, oil is heated with steam (we should remind that Tatneft was the first in Russia in 2006 to introduce its production technology on the basis of steam-assisted gravity drainage horizontal wells) and is adjusted to moving through a pipe. This is quite an expensive pleasure. One should also remember that the quality content of this oil is far from being Devonian (Devonian oil was discovered in Soviet Bashkiria and Tataria in the late 1940s). It contains a lot of paraffin wax, it is very sour, and its quality is much worse than that of our usual Devonian oil. A separate factory is needed, of course, to process such oil where manufacturing processes would be calculated for heavy sour crude oil or, more precisely, a separate unit would process it.
It is hard to produce and process heavy oil due to its specifics. It is highly-viscous and this is why it isn’t pumped out on its own. To produce it, oil is heated with steam
Why didn’t Tatneft build that factory?
It is also important that the processing technologies of the Ufa institute are ours, Russian technologies, and of course, in the context of the import substitution regime adopted by Russian authorities, we should we understand them. Once the Tatneft management discussed the possible risk of highly-viscous oil production in advance, which was linked with environmental damage — unlike Canada where it is produced almost in the tundra, far from settlements. And we do have an eco-friendly production method today — but this approach is expensive too, though we have to say it minimises environmental risks. Heavy oil in Canada lays almost on the surface, it is loaded by lorries, production volumes are just crazy. Venezuela has a lot of heavy oil too.
Why didn’t Tatneft build the factory? Because the oil company had more important tasks, particularly the construction of usual oil processing factories, TANECO project with its first and second stage, then the petrol production development. Tatneft has had a bit different priorities over these 10 years. Though I will note that a sour oil processing unit could have been installed at TANECO where it would have been reprocessed further in neighbouring units with hydrotreatment and so on. And it is not excluded that Tatneft will make such a decision considering that it already has all infrastructure.
Why didn’t Tatneft build the factory? Because the oil company had more important tasks, particularly the construction of usual oil processing factories, TANECO project with its first and second stage, then the petrol production development
Not so high profitability of heavy oil production so far
The construction of the separate factory to process highly-viscous oil, on the one hand, is caused by its big reserves in Tatarstan but, on the other hand, everything stumbles over big investments and ultimately the profitability of its production, which leaves a lot to be desired today. Firstly, due to the tax oil manoeuvre, residues of heavy oil are taxed and aren’t profitable. This is why Tatneft and TAIF-NK once decided to build an oil refinery to get rid of these residues. Secondly, you can’t take these residues far: let’s say, heavy oil will meet the needs of road construction in Tatarstan through received road bitumen. What’s next? Try to transport millions of the same mazut even to neighbouring regions, not to mention exports. What is road bitumen? It isn’t the same oil that was lifted and can immediately be laid on the road. It needs to be preliminarily processed, divided into fractions in the unit until those residues remain at the bottom: mazut, bitumen and so on. Other residues meanwhile are used to make gasoil, petrol, which, of course, is more profitable for oil companies, they are also in higher demand.
Why Russia doesn’t know how to produce shale oil, while Americans do
Today such highly-viscous oil is mixed with Devonian quality oil until it suits for reprocessing or sale. But nothing more. Urals oil itself is a product of a mixture of our oil, Western Siberian and others. This is closely monitored saying a factory to stop from time to time because too much low-quality oil turned out in the pipe, for example. Transneft keeps the recipe for this brand in its main pipes. They can even easily accept highly-viscous oil, which was already heated and ready to use to dilute them to have quality oil. But they anyway try to load the main pipes less given its sourness.
By the way, Nail Maganov said once that shale oil wasn’t our path, bitumen was our bread. Moreover, we have to say that we also the same shale oil in Tatarstan (even near Kazan), its reserves are distributed across the republic. The problem again is that we don’t know how to produce it so far. We don’t have corresponding technologies. Tatneft launched 2-3 shale oil producing wells, but its production requires exquisite workmanship. Americans do a great job, they overrun us a lot in shale oil production. The solution is either to invite them, which is unlikely in the light of sanctions, or do it ourselves. Tatneft deals with it too, though in test mode now.
I think given TANECO’s experience it will take no more than 3-4 years to build a new oil refinery of Tatneft, there is experience. Let’s remember that they built TANECO’s first stage during 6-7 years, while the second unit was launched 3-4 years later
It will take no more than 3-4 years to build Tatneft’s new factory
To sum up, we can say for sure that despite its high price and related risks, a factory to process highly-viscous oil in Tatarstan is necessary. Yes, now Tatarstan has just light oil. But Romashkino Field gives up to 15 million tonnes of good oil. But how long will it last? Russia’s future now lies with Arctic oil reserves, for instance, its production is also more expensive than usual. And Tatarstan’s future is in highly-viscous oil production Tatneft aims at. Light oil reserves around the world reduce year after year. But it is illustrative that if we google the word “production” and “highly-viscous oil”, mainly news and articles on its production by Tatneft and in Tatarstan will be found. Because a handful produces it in Russia. And nobody is going to. While Tatarstan should keep going, once it obtained a tax concession for ultra-vicious oil, otherwise its production wouldn’t have had a commercial meaning.
I think given TANECO’s experience it will take no more than 3-4 years to build a new oil refinery of Tatneft, there is experience. Let’s remember that they built TANECO’s first stage during 6-7 years, while the second unit was launched 3-4 years later. Why so long? Because it was the first oil refinery in Tatarstan built in an empty field in fact. They had to look for technology solutions, they sought for specialists, engineers, designers. It is good luck that they managed to complete this construction. But now we have specialists, there is a school, and there won’t be any problems to erect a new oil refinery.