During this time local refineries have closed down one after another, with only three refineries still operational out of ten operational 20 years ago. The biggest rise of imports started in 2009, when Arpechim, one of the refineries controlled by Petrom, was closed down. In the meantime, Romanians have come to pay more for a liter of diesel than Luxembourgers, although they earn eight times less. But despite the closing down of Arpechim, Romania still manufactures enough fuel to cover domestic demand.
Refining, an industry close to extinction
Data provided by the National Statistics Institute shows that while in 2007 Romania imported oils obtained from bituminous minerals, which include gasoline and diesel, worth EUR460 million, last year the value of these imports reached EUR1.2 billion. During the same period amounts of fuel imported went up from 0.7 million tons to 1.53 million tons.
The situation is somewhat paradoxical because although Romania doesn’t have enough oil from its internal production to meet demand, Romania has enough refining facilities where it could process more oil than would be needed to cover its domestic market demand. Out of the ten refineries operational twenty years ago, only three facilities still count in fuel production at present: Petromidia, Petrobrazi and Petrotel Lukoil. Whereas in ’88-89 people in the industry say 34 million tons were refined on the Romanian market, last year 9.5 million tons were refined in Romania.
Impact of Arpechim
The most abrupt rise in diesel and gasoline imports has been recorded since 2010, after Petrom, the largest player in the Romanian oil industry decided to shut down one of its two refineries – Arpechim – whose nominal capacity was 3.5 million tons per year. So, while in 2009 imports of oil products amounted to around EUR515.2 million per year, in 2010 they reached almost EUR962 million. Petrom said last year, after announcing the definitive closure of Arpechim, that the investments required by the small, inefficient refinery which is not located close to the sea, were not justified and that the European economic context was also not favorable to the refinery built in 1964. At the time Petrom decided to rely only on Petrobrazi to refine only the oil it exports, and resort to imports for the oil meant for the Romanian market.
If enough is produced in Romania, why is fuel imported?
Despite the closure of several refineries, those still operational in Romania produce enough fuel per year to cover domestic demand. But why is it not used to cover domestic needs, making it necessary to import?
For instance last year 6.7 million tons of gasoline and diesel were produced locally. Consumption of gasoline and diesel was a little over 6 million tons. So the entire consumption of gasoline and diesel could have been covered from the domestic production. But out of this entire production only 4.5 tons were delivered to Romania. Another 1.5 million tons of fuel were imported, according to ZF calculations based on INS data. The same is true for 2010, when local production of gasoline and diesel was 6.7 million tons. Only 4.3 million tons ended up on the Romanian market, with almost 1.6 million tons being imported.
Romania exports only to import
For instance oil group Rompetrol shows in last year’s report that almost 50% of Petromidia’s oil products were exported. So, while the refinery produced 1.28 million tons of gasoline and 1.5 million tons of diesel and kerosene, only 1.4 million tons of fuel were sold on the Romanian market, while the remaining amount was exported, although there was local demand for it.
“The closure of Arpechim definitely had an impact in the problem of imports. The costs of the refinery were too high and Petrom’s decision was to make one good refinery from two bad ones. But even if Rompetrol wanted to sell more on the domestic market, it couldn’t do it because the current network of filling stations and its portfolio of clients don’t allow it.”
In addition, a set of local taxes have made it cheaper to import than to buy the products from the local market.
Evolution of fuel imports, domestic consumption, oil meant for processing and domestic production of oil products between 2007 and 1Q of 2012.