Russian Far East is Struggling for Fuel

Russian Far East is Struggling for Fuel


Since the end of January, the Khabarovsk territory and Primorsky (Maritime) territory, located in the Far East of Russia, have had serious issues with automobile fuel supplies due to the shutdown of the Khabarovsk Oil Refinery for repairs.

People spent hours to get fuel at gas stations.

Although the plant resumed its operation on February 4, the situation remains tense.

Information that the Khabarovsk Oil Refinery, the leading producer of motor and boiler fuel in the Far East of Russia, had suspended the output of high-octane gasoline appeared in mid-January.

The Khabarovsk Oil Refinery is a part of the Independent Oil and Gas Company which is owned by Eduard Khudainatov.

The first gasoline shortages at gas stations began on January 18. The issue became most acute by January 26.

According to Federal Antimonopoly Service (FAS), during the refinery’s downtime fuel supplies decreased by an average of 30,000 tonnes.

At the same time, according to the plan, more than 38,000 tonnes of motor fuel would be supplied from other regions.

The Ministry of Energy and the Federal Antimonopoly Service reported that they had agreed with the Russian Railways (RZD) state corporation on a green corridor for railroad trains carrying fuel.

This step was supposed to ensure an uninterrupted supply of gasoline for gas stations located along federal highways.

However, cities suffered the most.

The longest queues were noted in Khabarovsk, Komsomolsk-on-Amur, Ussuriysk, and Vladivostok.

Only ambulances, emergency services and police get fuel without queueing up.

Gasoline was very often sold only on corporate cards for legal entities.

Some gas stations simply suspended their work due to the lack of fuel.

People began to create groups in social networks and Telegram, where they would sell a place in a line for fuel for 1,000 rubles ($13,5), shared information about which gas stations had fuel, as well as asked each other to sell gasoline.

In Khabarovsk, there were ads for the sales of scarce gasoline at price ranging from 80 to 125 rubles ($1.08 – 1.70) per liter plus 150-250 rubles ($2-4) for shipping.

The author of one of these ads offered a liter of gasoline Ai-92 (RON -92) for 75 rubles ($1), Ai-95 for 80 rubles ($1.1), and Ai-101 for 100 rubles ($1.3.)

These ads could be found on Avito, a Russian classified advertisements website, and Instagram. Replying to the comments of outraged people that the authors of the ads were profiting off of the drivers' difficulties, they said that "one did what one must do to survive."

Regional officials responded to the problem only after hundreds of posts regarding social media with photos of queues and complaints about the lack of fuel at gas stations.

On January 28, Anatoly Litvinchuk, the Deputy Chairman of the government of the Khabarovsk territory for the Fuel and Energy Complex and Housing and Utility Services, called the situation at local gas stations "an overblown demand" and said that "a reserve of fuel” was created.

On January 30, Litvinchuk blamed the residents themselves for the queues. In his opinion, they started buying gasoline as a reserve.

Finally, on February 4, Mikhail Degtyarev, the acting governor of the Khabarovsk territory, gave comments. He said that there was no crisis.

"Since the first days of the Khabarovsk oil refinery shutdown, the Khabarovsk territorial government has been in close contact with the Independent Oil and Gas Company and the Ministry of Energy.

As soon as panic buying started and the reserves began to run out, we asked the Federal Agency for State Reserves for additional gasoline," he said.

According to Vitaly Pustovoy, the chief doctor of the Khabarovsk Emergency Medical Service, the shortage of gasoline had no impact on the schedule of the medical enterprise.

"Every year, the Khabarovsk Emergency Medical Service signs a municipal fuel contract. As part of it, each vehicle has a fuel card which is used to fill it up," he said.

Svetlana Tremasova, the chairperson of the Far Eastern Association of Industrialists and Entrepreneurs and the Union of Transport Workers of Khabarovsk Territory Association, in turn, refuted rumors that half of the municipal transport was not in service due to a shortage of gasoline.

“Apparently, the authors of the posts do not understand how this segment of city life works,” Tremasova said.

Most municipal buses have been running on natural gas and diesel for quite some time. Only a small part of them, mostly older Gazelle vehicles, are fueled by gasoline.

According to Pavel Bazhenov, the President of the Independent Fuel Union, there are only two oil refineries in the territory and their output is not especially big. The one is located in Khabarovsk, the other, in the territory’s second-largest city of Komsomolsk-on-Amur.

Regular delivery of fuel by rail is expensive and unprofitable.

Using gasoline from the Federal Agency for State Reserves is not likely to solve the problem either.

There is only one way out, and it is to build more refining enterprises.

However, Bazhenov believes that it is impossible to implement projects of this kind without government support. At the moment, due to peculiarities of Russia’s tax system, oil producers find it more profitable to work for export rather than for the domestic market.

Back in August 2020, Igor Sechin, the CEO of Rosneft, a Russian integrated energy company, addressed Vladimir Putin with a proposal to create a petrochemical complex in Nakhodka [a port city in Primorsky territory about 85km east of Vladivostok] and complained about the difficulties with taxation in the industry.

"With the total consumption of about 6 mln tonnes of commercial petroleum products, two refineries that work there, in Komsomolsk and in Khabarovsk, can provide only about 3 mln tonnes.

Therefore, almost a half is brought in from other regions, and the price in this area is higher," said Sechin.

At the end of January, the Federal Antimonopoly Service and the Ministry of Energy agreed on a plan to keep the retail gasoline prices in check.

This measure is to solve the issue of pricing in the context of rising oil prices all over the world and the cheap Russian ruble.

Representatives of the independent refueling business suggest that the government should speed up the process of its decision-making to subsidize tariffs for rail transportation of motor gasoline and diesel fuel to the balance points located in the Far East.

The Khabarovsk Oil Refinery reported that as of February 6, it had already produced more than 1,800 tonnes of Ai-92 and 1,500 tonnes of Ai-95 gasoline.

According to the plant, gasoline is available for sale at 35 gas stations. It has tried to reduce the intervals of fuel deliveries to salespoints. The top executives of the Khabarovsk Oil Refinery expressed hope that the issue related to gasoline supply in the Khabarovsk and Primorsky territories would be fixed soon.

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