We are continuing the exclusive presentation of the evolution of Romania’s refining industry after 1990, to allow better understanding the meaning for the state of a possible takeover of the Petrotel and Arpechim refineries, mentioned for some time. Although the scandal of the shutdown of Petrotel by Lukoil has not come near its end, its relevance is conspicuous if Romania wants to keep something of its petrochemical industry.
With only three refineries left, each belonging to private owners, and with a refining capacity just above 10 million tonnes of crude per year, for an internal demand around 6 million tonnes of processed products, the decision-makers in Bucharest keep claiming the country has an excess of refining capacity. If so, what should Hungarians say, with MOL Hungary owning four refineries and two petrochemical factories, which do not run on domestic resources for the simple reason these don’t exist. While the Hungarians had a vision, Romanians completely lacked it. How about comparing the electricity production with the demand? It would mean slashing the capacities to half, on grounds of overproduction.
Before the privatization began, Romania had 10 refineries, in two main categories: big ones, contributing 85 percent of the processing capacity ((Petrobrazi, Petrotel-Lukoil, Petromidia, Rafo and Arpechim) and smaller, less complex ones for the remaining 15 percent (Astra and Vega in Ploiesti, Steaua Romana in Campina, Darmanesti and Petrolsub in Suplacu de Barcau). All of them were privatized. All the big ones survived on the market at first, while only Vega and Steaua Romana managed to stay afloat for a while. Then they were closed, too, as were the larger ones, except the last three – Petrobrazi, Petromidia and Petrotel-Lukoil.
Shutting them down as planned after 1990 would have proven a huge error by now. In Europe and worldwide, the refining capacity was insufficient for some time, but the crisis has changed the situation, and several European refineries (about 10) were shut down. The demand still existed, but the world market context had changed. But people formerly in charge in Bucharest were glad about this trend, because it justified the devastation of the Romanian refining industry.
A Technological Level Comparable to America’s
The new owners obviously invested serious money in the three refineries still in operation (Petrobrazi, Petrotel and Petromidia). The market and the global trends were compelling. But don’t think they had taken over junkyards..
All Romania’s big refineries were the deep conversion type, including catalytic cracking and coking facilities; the output was 65 percent white products and 6 percent gas for chemical processing; the remaining were heavier oils, asphalt or greases. Despite claims they were outdated, they had Nelson complexity indexes comparable to American refineries and higher than many European and Asian ones. Romanian governments, however, disregarded this fact upon the privatization.
Petrobrazi, Petrotel, Arpechim and Rafo each had two independent processing modules that could work separately, so each of them, exploited at only 50 percent of their capacity, could still be profitable. How come all of them posted losses for several years? Moreover, the Petrobrazi, Arpechim, Petromidia and Petrotel refineries included strong petrochemical sectors. Also, smaller refineries could have kept operating near the big ones, using the transfer of semi-processed products. Pipeline system existed, connecting them, and allowing the return of the primary or secondary processed products for catalytic processing.
The State Persevered After the First Loss
Refineries’ profits are not constant; they largely depend on the purchase price of crude oil. From this point of view, one could say the two refineries subordinated to OMV Petrom, namely Arpechim and Petrobrazi had an advantage. The current demand in Romania is roughly 3 million tonnes of gasoline and 4 million tonnes of diesel, but it is expected to grow significantly with the size of the national vehicle fleet over the coming years. Until then, exports justify the development of these refineries. Up to this point, the state made many management errors as the owner of the refineries, which resulted in huge financial losses.
All the refineries – except Arpechim and Petrobrazi, which were included in the Petrom National Oil Company (SNP) – were first grouped into a single company, Rafirom; then they were split as separate units; they accumulated massive debts and losses, and thus became lesser appealing for privatization. Petromidia was the only refinery who got investments amounting to 50 million dollars before the privatization, but it still entered this process with important debts. SNP got Petrobrazi and Arpechim also owing to covert maneuvers, beneficial for the potentates of the time. Rafo Onesti, which could have joined SNP, preferred negotiating with a Russian investor; it ended with debts of trillions of old lei (equivalent to hundreds of millions in the new currency), followed by a privatization with no profit for the state, then by shutdown.
(to be continued)