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TNK-BP looking at acquisitions in oil refining – Stanlow?


* TNK-BP runs its refineries at 90 pct

* A new distillate pipeline to start in 2012

* Executive cautions on upgrades, refining margins

(Adds quote, details)

By Emma Farge

LONDON, Nov 18 (Reuters) – Russian oil company TNK-BP (TNBPI.RTS) is looking at acquisitions or joint ventures as a means of growing in the oil refining sector, a senior company executive said on Wednesday.

In recent years, Russian oil firms have shown interest in acquisitions of refineries in eastern and western Europe to expand their businesses selling refined oil products and promote their crude oil exports.

“We are now in a position to see what inorganic opportunities may exist,” Volker Woyke, TNK-BP’s vice president of refining, told an industry conference in London.

Inorganic growth often refers to acquisitions or joint ventures.

Woyke said the company’s refineries were running at 90 percent of their capacity.

This is higher than the average in Europe, where weak demand has forced refiners to lower their utilisation rates to an estimated 80 percent.

Some oil refineries have been put up for sale. These include Royal Dutch Shell’s (RDSa.L) Stanlow in Britain and its Harburg and Heide in Germany as well as Grangemouth in Scotland, currently operated by Ineos. [ID:nLQ224893]

Another Russian firm, LUKOIL (LKOH.MM), bought a stake in French major Total’s (TOTF.PA) refinery in the Netherlands in June.

Asked on the conference sidelines whether the firm was in talks to buy refineries in Europe, Woyke said: “we are speaking to many people like at conferences.”

TNK-BP is Russia’s third largest oil and gas producer and British major BP (BP.L) owns part of the company.

It has four refineries in Russia and one in Ukraine, with combined capacity of 600,000 barrels per day, Woyke’s presentation materials showed.

He also said a new pipeline to export middle distillates via Black Sea ports would start in 2012.

“We have plans for a southern pipeline that will allow us to deliver middle distillates into Black sea ports….The pipeline is planned for 2012,” he said.

Russia is the key supplier of middle distillates, such as diesel, to Europe. The new pipeline will boost export volumes further, which could hit refining margins for European refiners.

Some Russian refiners can now meet Europe’s tighter environmental specifications for refined oil such as ultra-low sulphur diesel.

Woyke’s presentation material showed TNK-BP exports 45 percent of its crude and 20 percent of refined products.


Woyke said TNK-BP is building hydrotreating capacity for desulphurisation at its Saratov refinery by 2012 to improve the quality of diesel to 10 per parts million (ppm) and 50 ppm sulphur content, matching European quality.

That is a part of a plan to invest $1.3 billion over the next five years to modernise its refineries, which are mostly simple and have a high yield of loss-making heavy fuel oil. [ID:nLF586323]

However, he cautioned about further upgrades.

“Our current five-year plan contains this (upgrades) as an option, not as a firm plan, and we are rolling our five-year plan at annual intervals. We will watch what’s feasible and what’s possible,” he said.

Profit levels of oil refineries — refining margins — were unlikely to return to the record high levels seen in 2008, when he described the profits from downstream refining operations as almost almost matched those from upstream oil and gas production operations.

“We are robust in the sense that we can live in the current environment,” he said, adding, “We may not be able to deliver the same level of EBITA (earnings before interest, tax and amortisation) as our dear upstream colleagues.”

(Reporting by Emma Farge, writing by Ikuko Kurahone; editing by Anthony Barker)

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