A tax maneuver which the Russian government made in the oil sector in 2018 is achieving its first significant results.
The Antipinsky Refinery, the largest refinery in the country that does not belong to one of the vertically integrated resource corporations, has suspended its operations.
The Russian transport monopoly Transneft stopped supplying the refinery with oil and removed it from its shipment plan in May, the company’s spokesperson Igor Demin told TASS on Thursday.
That same evening, the refinery was cut off from trade access to the St Petersburg International Mercantile Exchange, since it failed to meet its obligations. After concluding a deal to sell 1,020 tons of diesel fuel, it was unable to supply the product, the exchange explained.
The enterprise has effectively been completely shut down, numerous sources told Vedomosti, including a counterparty, an official and a person close to the refinery’s creditors.
In April, the company’s operating capital dried up, and it was unable to purchase oil.
At the end of 2018, the refinery was assisted by Sberbank, which granted it a 10 billion ruble loan and sent its representative Maxim Andriasov to bring the company out of the crisis.
However, between January and March the plant operated at only one third of its capacity, and its revenue was insufficient to pay its debts. At the start of May, VTB Commodities Trading, a subsidiary of VTB Bank, filed a lawsuit against the refinery at the London High Court of Justice, demanding the freezing of € 225 million of the company’s assets.
“The company is profitable, but the profits are not enough to repay the debt,” explained Vygon Consulting chief economist Sergey Yezhov.
The refinery’s owners had invested heavily in upgrades that would enable it to produce 800,000 tons of class Euro 5 petrol annually. However, its financial problems grew serious after the government increased the tax burden on the sector and simultaneously demanded that retail prices remain fixed.
In April it was learned that the refinery’s current owner, Dmitry Mazurov’s New Stream Group, was negotiating its sale to the State Oil Company of Azerbaijan Republic (SOCAR), including the oil deposits in the Orenburg province. The buyer would have had to take on $3 billion of the New Stream Group’s debt. Ultimately the negotiations fell through.