Russian Lukoil has reduced gasoline production due to sanctions

Russia's largest private oil company, Lukoil, has halved the production of high-octane gasoline at its largest refinery, the Nizhny Novgorod Refinery, as reported by Kommersant, citing sources.

According to them, this reduction occurred on January 4 due to a malfunction in the catalytic cracking unit. Specifically, foreign compressor equipment broke down, and its replacement is not possible in the near future due to sanctions restricting its procurement.

The Nizhny Novgorod Refinery has two catalytic cracking units, put into operation in 2010 and 2015. The older equipment experienced a failure, but according to one source, a breakdown also occurred on the 2015 catalytic cracking unit on December 26, 2023. However, it has since been restarted at a reduced capacity.

From January 10, Lukoil suspended the sale of AI-95 gasoline on the exchange, according to sources. This strategy of the oil company is explained by its desire to ensure fuel supply for its own gas stations, leading market participants to stock up on fuel.

"The Nizhny Novgorod Refinery is crucial for supplying the Moscow region, accounting for about 30% of gasoline consumption in Russia. Previously, gasoline from the refinery was delivered to Moscow by pipeline. Compensatory batches from other refineries will likely have to be transported by rail, leading to a significant increase in logistics costs and longer delivery times," the publication adds.