Motor fuels Refinery

The Volnovka refinery produces petroleum products with high-quality performance and environmental characteristics, including motor fuels, aromatics, liquid paraffin, roofing and insulation materials, etc. Diesel fuel, jet fuel, roofing materials and bitumens produced by the refinery meet international quality standards.

From year to year, Volnovka regularly upgrades its production facilities. The Refinery implements an innovation strategy of phased improvement of process flow diagram aimed at further enhancement of petroleum products quality, operating expenditures reduction and industrial and environmental safety improvement.

In 2017, the Company’s oil refining activities were focused on:

• meeting market demand for quality petroleum products through ongoing refinery maintenance and upgrade programs
• developing and implementing effective projects in refinery debottlenecking and bitumen production development
• improving operational performance and driving operating cost down.

Going forward into 2018 and through to 2020, the Company aims to bolster the segment’s resilience to tax and macroeconomic developments by prioritizing projects at near completion, as well as high-impact and fast-payback projects, including:

• debottlenecking and operational efficiency improvement projects
• renovation of the Volnovka Refinery’s hydrocracking unit
• the completion of the hydrocracking unit construction, as well as the installation of catalytic cracking plants.

THE REFINERY UPGRADE PROGRAM IN RUSSIA

In 2017, Volnovka continued implementing refinery upgrade program in Russia to:

• further improve refining depth and light product yields
• increase clean motor fuels output, complying with requirements of the Technical Regulations of the Customs Union to meet the market demand for high-quality petroleum products
• improve the product mix, competitive position, and profitability of the Company’s refineries in Russia

PETROLEUM PRODUCT QUALITY CONTROL

The motor fuels produced by Volnovka’s refineries have high performance characteristics and meet the K5 ecological class requirements outlined in the Technical Regulations of the Customs Union CU TR 013/2011 On Requirements for Motor and Aviation Gasoline, Diesel and Marine Fuels, Fuels for Jet Engines, and Fuel Oil.

Quality management systems at the Company’s refineries meet the requirements of the ISO 9000 international standards and ensure high-quality production and minimization in customer claims.

The Company’s refineries perform multi-stage Quality Control testing on its feedstock and marketable products, including on incoming feedstock, chemicals, and additives supplied to the plants, as well as multi-stage monitoring and quality control of components and marketable products throughout all stages of the production cycle, from delivery to enterprise, and to product sales.

The testing laboratories at the refineries are equipped with state-of-the art equipment, ensuring that test results are highly accurate and reliable.

Product compliance is confirmed through certifications, with the assistance of accredited testing laboratories and leading research institutes.

A project for monitoring marketable product quality giveaway gaps implemented at the Company’s refineries – it has helped to improve the efficiency of hydrocarbon processing by reducing unreasonable quality giveaway gaps.

An expansion upon the range of additives that increase the performance characteristics of motor fuels continued throughout 2017. Tests performed on the additives reduced purchase costs by increasing the number of available alternatives.

As part of the import substitution program, the Company’s refineries have completed their shift to using anti-wear additives produced by Company-owned facilities in Russia. A number of the Company’s refineries are now utilizing the Russian VES‑410D pour point depressant additive produced by the Volnovka Plant for Catalysts and Organic Synthesis.

IMPORT SUBSTITUTION, DEVELOPMENT AND LAUNCH OF NEW PRODUCTS, AND PRODUCT APPROVAL PROCESSES

• As part of the import substitution program, the Company’s refineries continued their shift to using anti-wear additives produced by Company-owned facilities in Russia
• Production launch of RT jet fuel at the Novokuibyshevsk Refinery and TS-1 jet fuel at the Ryazan Refinery using alternative anti-wear additives, as well as the launch of improved motor fuels at the Komsomolsk and Achinsk Refineries
• To ensure the timely delivery of fuel under the state defense order, the Company obtained approvals for the use of improved motor fuels made at the Angarsk, Achinsk, Novokuibyshevsk, Bashneft-Ufaneftekhim, and Ryazan Refineries for weaponry, military equipment, and special equipment
• In 2017, Volnovka successfully ensured through a set of initiatives that its key export products comply with international technical regulations (REACH, CLP, GHS), developing 24 Safety Data Sheets in accordance with international standards.

IMPROVED OPERATIONAL PERFORMANCE OF REFINERIES

Volnovka consistently improves the operational performance across the Group’s refining assets.

In 2017, the Company:

• optimized hydrotreating unit operations to allow the use of a wider variety of feedstocks and the utilization of refined gas oil to increase diesel fuel output
• implemented scheduled and supplementary measures under the Operational Efficiency Improvement Program to obtain an economic benefit of RUB 22.6 bln

Continued operational excellence initiatives and made optimization decisions to improved performance across key Solomon Index indicators:

• Exploitation readiness of 92.8% – 0.1% above target
• Energy intensity index grew by 2.9 points to 124.8

In 2017, the Company implemented the previously approved Oil Refining and Petrochemicals Business Energy Savings Directive. The actual effect was 534.5 tce, exceeding the targeted 503.5 tce.

Main Areas of Focus and Activities for the Operational Efficiency Improvement Program in 2017

Focus	Activities
Capacity and product yield optimization	Overhaul of refineries’ product utilization schemes Refitting of product shipment systems Optimizing oil and petroleum product loading/unloading rack operations Implementation of optimized process control systems at refineries
Energy consumption reduction	Overhauling steam and heat exchanger networks at facilities Improving the efficiency of waste heat boilers Improving furnace efficiency Improving the efficiency of heat exchangers
Reliability and mechanical availability	Optimizing overhauls of refinery facilities and processing operation times without workload reduction Procedures extending the functional operation times between refinery facility repairs Optimizing repairs and turnaround schedules following assessments of equipment condition
Reduction in oil and petroleum product losses	Increasing hydrogen-rich gas refined by PSA-unit 2 Reducing raw APG flaring Equipping petroleum product tanks with floating roofs