site.btaCurrently Burgas Refinery Processes 100% Russian Oil, No Alternative Varieties Offered on Bulgarian Market

In the first quarter of 2022, 63% of the processed oil was of Russian origin and the rest were mainly Middle Eastern varieties, but now 100% of the oil processed is Russian because the supply of alternative varieties on the Bulgarian market is currently very limited, Ilshat Sharafutdinov, Chairman of the Management Board of LUKOIL Neftochim Burgas AD, said in an interview with BTA. He explained that switching to non-Russian mixtures will require significant investment and will take a long time.

Sharafutdinov explained that the lack of alternative varieties of oil is currently related to increased foreign demand due to the expected embargo on Russian oil.

He went on to say that from the point of view of logistics, deliveries by tankers from Russia to Bulgaria are comparable to deliveries via the Druzhba pipeline to Slovakia and Hungary. They take about 36 hours through a logistics infrastructure that took years to develop, while supplies from the Middle East in normal weather conditions take about 25-30 days due to the longer journey and restrictions on crossing the Dardanelles and the Bosphorus. "This makes ensuring the continuity of supplies from the Middle East and from any other destination much more difficult, given that we accept an 80,000-ton oil tanker every 3-4 days," Sharafutdinov said.

He explained that the Burgas refinery has experience in refining Middle Eastern and North African oil varieties. "The refinery is designed to process oil with medium sulfur content and medium density of the Urals oil type. The optimal efficiency of refining is achieved in the composition of the crude oil, which is composed mainly by Russian Urals oil in a mixture with other varieties."

However, the replacement of Urals oil with other varieties (of very different quality) can lead to serious shocks: unplanned shutdowns, accelerated corrosion wear of equipment, poisoning of catalyst systems, explosion, fire, accidents with possible environmental consequences. The replacement is also likely to affect the range of products that the refinery produces in addition to fuels, which are of strategic importance to the country as they provide other industries (bitumen for road construction, polypropylene for the plastics industry, sulfur and etc.), added LUKOIL Neftochim's MB Chairman.

When asked why, since the prices of Urals crude are about 20-25% lower than the prices of Brent crude, the prices of oil in Bulgaria (exclusive of excise duty) are not 20-25% lower, given that the Burgas refinery mainly or exclusively processes the Urals variety, Sharafutdinov said that LUKOIL Neftochim Burgas operates on a "processing" scheme and does not trade in petroleum products, and could not comment on the prices of the products. "In general, the prices of crude oil and petroleum products are determined by international quotations and are not directly affected by production costs, but by market laws - the balance of supply and demand. Any artificial restrictions imposed on the market make traders insure their risks, and push prices up," he said.