Investing in the future

Sdancuo

A view of a Lukoil petrol station in the city of Valjevo, Serbia.

Investing in the future


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Modernization of “LUKOIL Neftohim Burgas JSC” refinery enhanced the plant’s efficiency amid systemic struggles of the European refining industry and the forced shutdowns of numerous plants in adjacent countries.

In the context of intensifying global competition oil refineries have invested in product and plant innovation, and optimization of production processes to ensure the output of superior quality products, attuned to market demand, whilst simultaneously minimalizing costs. However, certain features within the EU have meant that local refineries are having a harder time competing globally.

The majority of the European oil refining plants were constructed soon after the Second World War and were designed to meet the high demand for petrol. The ensuing popularity of diesel has meant that its share has now grown to over 75%, which is virtually unique among major markets.

As a result, European petroleum refining industry’s margins almost halved, before a slight recent recovery. But margins went up also in the competing regions. To cope with this reality, European plants should be focused on costs optimization and investments in refinery adaptation. However, years of low margins and demands on investments for standards compliance means many refineries lack the means to invest in competitiveness. 16 oil refineries went into liquidation in the EU since 2008, and a further dozen refineries are expected to be closed by 2020.

Moving forward

The EU petroleum refining sector will endure through strong businesses being able to modernize their capacities to anticipate the changes in the demand and environmental requirements. Of these, large and advanced oil refineries will be the most successful.

Bulgarian “LUKOIL Neftohim Burgas JSC” falls into that category. This is the only refining plant in Bulgaria and the largest one on the Balkan Peninsula.

The plant refines a broad range of crude oil brands into various products that are then delivered to domestic and international markets.

LUKOIL has recently completed an extensive modernization project of the refinery, which started in 2012 with the signing of the project implementation agreement with the Italian subsidiary of Technip.

The share of high quality diesel production has been raised to 1,2 million tons per year, as were the shares of other valuable light fractions and low-sulphur (<1%) fuels, the production of high-sulphur fuel oil has been terminated altogether, the overall crude oil conversion rate went up to 90% from 75%.

At $1,5 billion, this project became the largest recent investment in the Bulgarian economy.

In May 2015, at its opening ceremony Vagit Alekperov, LUKOIL’s CEO: “The commissioning of this complex will make the company’s facilities in Bulgaria one of the most advanced both in Europe and the whole world”.

Similar refining facilities currently exist in only seven countries.

A socially positive enterprise

Around 5000 people are directly and indirectly employed by the “LUKOIL Neftohim Burgas JSC” refinery, of which some 1400 work at the refinery itself. Specially designed comprehensive benefits packages offer improved healthcare, reward experience and encourage lifelong learning among other things. Salaries levels are among the highest in the country.

The plant’s social care is not reserved to its employees only. Over the past 9 years the company has spent more than $ 14,2 mln charity.

For example, kindergartens and schools on the territory of Burgas and Kameno urban areas were renovated under the plant’s patronage. It promoted such initiatives as: “Bicycle town – the model of urban mobility”; “Cultural and historical heritage of the St. Anastasia Island and the city of Burgas”; among others.

Corporate social responsibility, in the experience of  “LUKOIL Neftohim Burgas JSC” can be an effective complement to public action in solving some of its more pressing challenges.

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