Russia oil product exports fall by a third due to Ukrainian drone attacks on refineries

Russia is increasingly struggling to maintain the export of oil products after at least half a dozen long-distance Ukrainian drone attacks on refineries caused fires causing temporary halts in production at facilities across western Russia.

Russia has reduced gasoline and diesel exports to non-CIS countries by 37% and 23% respectively in January y/y, to compensate for unplanned repairs at refineries, the Ministry of Energy said on February 1.

Russia will likely cut exports of naphtha by some 127,500-136,000 barrels per day, or around a third of its total exports, after fires disrupted operations at refineries on the Baltic and Black Seas, according to traders and LSEG ship-tracking data, Reuters reports.

Russia was already voluntarily cutting its oil and fuel exports by 500,000 barrels per day in the first quarter of this year as part of voluntary cuts agreed by OPEC+ last year to support prices.

As reported by bne IntelliNews, Ukraine has a new strategy, deploying new longer-range drones that can travel more than 1,200km from Ukraine’s borders and hit refineries from St Petersburg to the Black Sea. According to the latest reports, Ukrainian drones appeared in Nizhny Novgorod for the first time on February 1.

Outages include a production halt at a unit of Lukoil’s NORSI refinery, the country's fourth largest, near the city of Nizhny Novgorod, some 430 km (270 miles) east of Moscow that Reuters reports is believed to be a technical outage and not due to a drone attack, according to the Russian authorities. Russian Deputy Prime Minister Alexander Novak said on January 27 that repair work would take a month or a month and a half to complete.

As a legacy of the Cold War, Russia’s refineries remain relatively well protected from aerial attacks and Ukraine’s drones are not powerful enough to destroy a refinery, but they can cause fires that bring production to a standstill while repairs are affected in what Sergey Vakulenko, an independent energy analyst and consultant to a number of Russian and international global oil and gas companies, dubbed a strategy of “nuisance attacks” .

The biggest attack to date caused a big fire at Novatek’s Ust-Luga petrochemical plant near St Petersburg on January 21 that makes petroleum products like kerosene and naphtha that all go for export and put the plant out of action for a week.

In the most recent incident, the Ukrainian media outlet RBC claimed that a drone had struck the Nevsky Mazut oil refinery in St Petersburg in a strike carried out by Ukraine's military intelligence (HUR) on February 1.

The strikes against refineries are as much about reducing supplies of fuel to the Russian domestic market as they are about reducing Russia’s export earnings. Russia already suffered from a fuel crisis last September when its refiners struggled to meet elevated demand at home for fuel thanks to the war in Ukraine, leading to shortages of diesel and petrol at the pumps.

Russia’s oil majors have boosted petrol production in anticipation of rising demand, which has led to an increase of gasoline supplies to the domestic market in first 25 days of January by 7%, or 150,000 tonnes y/y, and diesel supplies by almost 17%, or 490,000 tonnes, according to Russia’s Energy Ministry, Reuters reports.

Domestic inventories for ensuring stable supplies to meet domestic demand are 1.9mn tonnes for gasoline and 3.9mn tonnes for diesel fuel, up 16% and 7% from January 2023, the Energy Ministry said.