August is always a tense month for the fuel market in Russia. Some refineries go into scheduled maintenance, farmers buy fuel for the harvest, and ordinary citizens head to their summer homes. But this year, fuel is not just rising in price – it’s disappearing across the country. Queues, coupons, limits on sales per person… What’s going on, and what do Ukrainian drones have to do with it? We discussed this with oil and gas analyst Mikhail Krutikhin, partner at the information and consulting agency “RusEnergy.”
UAF UAV attack on the Unecha linear production-dispatch station (LPDS). Source: MADYAR via Telegram
- There is currently a fuel shortage in the Russian market – it has reached the point where in some regions fuel is sold by coupons. From your point of view, how bad is the situation and how significant a role do drone attacks on refineries in central and southern Russia play?
- There are several problems at once here. First, there is seasonal demand growth. This year it’s especially strong because, due to constant flight bans linked to drone attacks, many people decide not to fly and instead travel by car. Second, agricultural producers have already started stockpiling fuel for the harvest. The military front also needs fuel.
So, demand is elevated. Plus, in the European part of Russia, refinery capacities are being knocked out by Ukrainian missiles and drones.
If we consider all of Russia, about 16% of installed capacities have been put out of operation due to Ukrainian attacks: Russia produces about 332 million tons of petroleum products annually – including both large and small plants – and according to my calculations, 51.8 million tons per year have been taken offline. That’s almost 52 million tons per year. But this is for all of Russia, and we see that drones do not reach the Urals, Siberia, or the Far East. So the situation in the European part is even worse. This is a very important reason. And the attacks will continue, apparently, because we see them intensifying.
- Ukrainian drones and missiles don’t reach the Urals, but the toughest situation is not only in Crimea but also in the Far East.
- The situation in the Far East is different. There are two main refineries there, in Khabarovsk and Komsomolsk-on-Amur. They are powerful and need about 13 million tons of oil per year to operate at full capacity. But they are underloaded because Rosneft uses the ESPO pipeline mainly to export crude oil to China.
- So, Rosneft is to blame for the fuel shortage in the Far East?
- It’s written all over Sechin’s forehead that he organized this. The Far East and the European part of Russia experience fuel shortages for different reasons.
- Recently, Ukrainian drones also damaged NOVATEK’s gas terminal in Ust-Luga. What consequences will this lead to?
- There’s more noise than real effect here. This is not an oil terminal. So, oil exports from Ust-Luga can’t decrease because of the drone attack. However, it’s not just a terminal – it’s equipment for preparing gas condensate for export. NOVATEK is one of the main, if not the main, exporters of stable condensate.
But the main point from which they have always exported it is the White Sea, the port of Kandalaksha. Ust-Luga is not their main export point for condensate. But oil exports from Ust-Luga have been suspended. Not because of this attack, but because Ukrainian drones hit the oil pumping station in Unecha on the Russian-Belarusian border. From there, a pipeline called BTS-2, the Baltic Pipeline System-2, runs to Ust-Luga. Currently, due to the damaged station, oil cannot be pumped through it, so oil exports from Ust-Luga have stopped.
- So, did the Ukrainian drone operators miss their target or were they actually aiming for NOVATEK’s gas terminal?
- Well, I don’t know what they intended. But in 2024, drones already struck Ust-Luga and hit some NOVATEK petrochemical production as well.
- When do you think the fuel situation in Russia might normalize?
- I think it will only get worse. First: I believe attacks on refineries from Ukraine will intensify. This can’t be stopped. They have more and more missiles and drones, so the attacks will only increase.
And the second reason is that oil companies cannot come to an agreement with the government on the compensation scheme for supplies to the domestic market. They receive compensation for agreeing to supply the domestic market, but they are trying to change the amount and the formula for calculating it. There are three calculation mechanisms; I won’t go into details now, as it’s not a topic for the media, but the point is that the government involved with this compensation cannot reach an agreement with the oil companies. Because of this, disruptions will continue, there will be shortages, price increases, and so on.
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