New Russian refining subsidies taking shape
Published by Nicholas Woodroof,
Editor
Hydrocarbon Engineering,
Underinvestment in fuel oil destruction will exacerbate the oversupply of fuel oil following the introduction of new International Maritime Organization regulations that will cause many ships to find alternatives to high sulfur fuel oil.
The new system the government is expected to embrace will subsidise qualifying refineries with a reverse excise tax. All refiners would pay an excise on each tonne of crude processed and then be reimbursed if the quality of their output meets certain standards. The reimbursement would be greatest for inland refineries, compensating them for the higher transport costs required to deliver products to ports for export. The system would replace the long-existing system of oil export duties, which gradually will be phased out by 2024.
As ESAI Energy reports, an important distinction between the old and new systems is that the outgoing system punishes fuel oil production and rewards the production of clean gasoline and diesel. The new system, however, would provide a subsidy to refineries whose product slate surpasses certain standards.
“Once a refinery’s product slate achieves certain parameters and qualifies for the subsidy, the incentive for further investment in coking and other discretionary fuel oil destruction will weaken,” explains ESAI Energy Principal, Andrew Reed. “That is because Russia will eliminate the oil export duties that punished fuel oil production and rewarded output of clean gasoline and diesel. Once a refinery adds hydrocracking and qualifies for the subsidy, it might not view coking as a worthwhile follow-on investment.”
Read the article online at: https://www.hydrocarbonengineering.com/refining/15082018/new-russian-refining-subsidies-taking-shape/
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