(Bloomberg) — Russia’s ability to keep making fuel at the normal pace is looking increasingly precarious following a surge in Ukrainian drone attacks on the nation’s oil refineries, including a fresh incident on Friday.
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For now, analysts who follow the nation’s oil industry say that the attacks are manageable for Russia and not enough to cause serious concerns about fuel production, given that the proportion of the country’s refining offline from the incidents is small. However, Ukraine appears set on ramping up attacks at its foe’s energy infrastructure, raising the likelihood of further attempts.
In the past eight days alone, swarms of Kyiv’s drones targeted three major refineries in central and southern Russia, as well as a pumping station on an important crude-export line, according to Ukraine’s General Staff and other security officials familiar with the attacks. The most recent of those was on Lukoil PJSC’s Volgograd refinery on Friday.
Russia, the world’s largest country by landmass, makes vast amounts of fuel both for its domestic needs and the global export market. Production levels still remain high, but they need to be — supplying over 144 million people. However, there are tentative signs that Ukraine’s drones may be starting to chip away at that output.
At least one of the crude-processing facilities attacked a week ago — Rosneft PJSC’s giant Ryazan refinery about 120 miles southeast of Moscow — has halted processing. The scale of any possible damage after the Friday attack on the Volgograd plant is unclear, while Lukoil’s Nizhny Novgorod refinery appeared to be unscathed following an attack on Wednesday.
Sergey Vakulenko, who spent a decade as an executive at a Russian oil producer, and is now a scholar at the Carnegie Endowment for International Peace, said the current situation looks manageable.
“A stoppage of a few refineries for a few weeks is something that the Russian oil industry and economy can easily sustain, judging by the last year experience,” he said. “Whether the effects of the attacks would be substantially wider-reaching and longer lasting is hard to say at the moment.”
The Ryazan refinery is located close to a few others — in Moscow, Yaroslavl, Kstovo — which can cover the possible shortage within its supply zone, Vakulenko said.
Russia should largely be able to make up for any shortfall from Ryazan by boosting output elsewhere, even if that might get more challenging, said Viktor Katona, lead crude analyst at energy analytics firm Kpler.
He estimates that Russia’s crude-processing rates could now be as low as 5.2 million to 5.3 million barrels a day — levels more commonly associated with spring and autumn, when the plants will carry out routine maintenance during periods of relatively fallow demand.
As Russia’s full-scale war against Ukraine approaches its fourth year, Kyiv has been sending record numbers of drones into Russia, attacking not just key energy facilities but also plants involved in production of ammunition.
Russia has been hitting Ukraine’s energy infrastructure regularly since the start of the war, with the attacks resulting in massive blackouts, leaving millions without electricity.
Authorities in Moscow and companies rarely comment on effects of the drone strikes on the nation’s own industrial facilities and economy. The government classified data on Russian crude production and exports in 2022, making it harder to assess the impact of Ukraine’s salvos.
Ukrainian officials maintain that the main goal of their attacks on Russian oil refineries, pumping stations, pipelines and oil depots, is cutting supplies to the Russian army and reducing the Kremlin’s ability to produce and export oil and fuel, a key commodity for the nation’s budget.
Russia is one of the world’s top oil and fuel producers and exporters and has maintained flows to customers overseas even as western sanctions resulted in the nation losing the European and North American markets. The country’s exporters have been able to redirect the volumes to buyers in locations including India, China and Turkey.
On Jan. 10, the US imposed its toughest sanctions on Russian oil and gas ever, blacklisting Gazprom Neft PJSC and Surgutneftegas PJSC and a large part of the shadow fleet that carries the nation’s barrels abroad.
The sanctions, which are designed to further limit the Kremlin’s ability to market its crude and petroleum products, have a wind-down period until end-February, and so far have not affected the Russian deliveries, shows data gathered by Bloomberg.
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