ANNUAL REPORT 2005 - Lukoil

ANNUAL REPORT, 2005
International
Throughputs at LUKOIL foreign refineries were 10.25 million tonnes in 2005 (including 273,000 tonnes
of fuel oil), which is an increase of 1.77 million tonnes, or 20.9%, compared with 2004.
Average refining depth at foreign refineries increased to 77.5% (70.5% in 2004). Light product yield
was 60.9% (56.3% in 2004). Irretrievable crude losses at foreign refineries declined from 1.20% in
2004 to 1.07% in 2005, saving $5 million. The share of high-octane gasolines in total motor gasoline
output rose from 97.3% in 2004 to 98.6% in 2005. The positive trends were mainly due to re-commissioning
at the end of 2004 of the Company's Romanian refinery, Petrotel-LUKOIL, following major
reconstruction work. Capital expenditures on modernization of LUKOIL's foreign refineries were $105
million in 2005", and investments were $66 million.
The Burgas Refinery in Bulgaria carried out reconstruction of the regenerator on its catalytic cracking
unit. This work regulated the heat balance and increased recovery of the desired cut. The
Refinery also launched a new system that allows its power generating facilities to switch between
heating fuel and natural gas, depending on which is cheaper at any time. In January 2005 Burgas
began production of diesel fuel and gasoline with sulfur content below 50 ppm, complying with
Euro-4 standards.
The Odessa Refinery completed reconstruction of its desalting and atmospheric and vacuum distillation
unit in 2005, increasing annual crude capacity to 2.4 million tonnes. Irretrievable crude losses
were reduced to 0.69%, saving $300,000. As part of the integration arrangement for deep refining at
LUKOIL's foreign refineries, Odessa supplied 273,000 tonnes of fuel oil to the Burgas Refinery. These
operations give a major synergy effect by using the Company's Ukrainian and Bulgarian refinery facilities
in a single production chain.
The Odessa Refinery has been closed since July 2005 for large-scale reconstruction, centred on installation
of a catalytic cracking complex and power generating facilities. The work is expected to cost
$320 million and will take 5 years to complete. Annual crude refining capacities will be kept at 2.8 million
tonnes, and production of fuel oil will be reduced while output of products with high value added
will increase.
The Petrotel-LUKOIL Refinery reopened at the end of 2004 after a 3-year upgrade and achieved efficiency
targets in 2005. Light petroleum product yield increased to 75.5% compared with 68.5% in
2000, refining depth increased to 94.9% from 86.7% in 2000, and irretrievable crude losses declined
to 0.93% from 2.06% in 2000. The Refinery produces diesel fuel and gasoline to Euro-3 and Euro-4
standards, adjusting its product mix to match demand on the market.
In order to improve product quality and save crude the Refinery installed a drying system with mole
sieve for inputs on the isomerization unit. The Refinery also injected additives for secondary burning
and raising octane number in the catalytic cracking unit in order to stabilize the unit's operation. The
octane number of produced gasoline was thus raised by one point.
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