Rosneft to Invest $2.2 Billion in Russian Far East This Year

OAO Rosneft, Russia’s largest oil producer, plans to invest more than 70 billion rubles ($2.2 billion) this year in Russia’s Far East on a refinery upgrade, a petrochemicals plant and oil exploration.

The planned Komsomolsk refinery upgrade to improve fuel quality, which includes building a hydrocraker, reformer and coker by the end of 2015, will cost 108 billion rubles, Rosneft said today in an e-mailed presentation. It plans annual output of polymers from a Far Eastern petrochemicals plant at 3.6 million tons a year for 2017

President Vladimir Putin has called for fines against refiners who fail to carry out upgrades and continue to produce substandard fuels. State-run Rosneft has responded by boosting spending 23 percent this year, mainly on refining.

The Far East, among Russian regions that suffered from gasoline shortages last year amid a move to improve fuel standards, has high demand for gasoline, kerosene and winter diesel, according to Alliance Oil Co. (AOIL), which owns the region’s other major refinery. Alliance plans to finish upgrades to its Khabarovsk plant next year, according to the company website.

“The only question is why Rosneft didn’t start this upgrade four or five years ago,” Alexander Nazarov, an oil and gas analyst at OAO Gazprombank, said by e-mail. “Alliance will be able to enjoy a couple of fat years before Rosneft completes its upgrades.”

Rosneft laid a ceremonial cornerstone for the construction of the petrochemicals plant today as Putin meets with leaders of nations in the Asia Pacific Economic Cooperation group in Vladivostok, Russia, according to the statement.

“Its a very good location for petrochemicals products distribution,” Nazarov said. “China, for example, consumes the lion’s share of rubber exported from Russia.”

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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