RusEnergy

03.03.2006 MosNews - Sixty-five percent of Russia's oil refineries are outdated and in need of major reconstruction work, the country's Deputy Economy Minister Kirill Androsov said on Friday, March 3. Speaking at a meeting of the Federation Council, upper house of the Russian parliament, Kirill Androsov said that an economic motivation for reconstruction of oil refineries must be provided by using them to produce higher-quality fuels. "A stimulus for reconstruction must be provided not by nationalizing them, but by using higher-quality fuels. When it's profitable to use high-quality gasoline, oil companies will produce it," Androsov said, quoted by RIA Novosti. He added that this could be done by lowering duties on high-quality fuels. "The Economic Development and Trade Ministry does not think that dividing vertically integrated oil companies would provide an additional motivation for reconstructing oil refineries," he said. When asked about the price of regular AI-92 grade gasoline sold at gas stations across Russia, he said that "30 percent [of the price] goes to operational costs, 50 percent goes to tax and duties, while the profit to companies — from oil field to gas pump — amounts to 20 percent." However, Androsov said, exerting direct state regulation on retail prices for oil products would not resolve the problems of rising fuel prices. "We have the example of Ukraine, where as a result of such regulation, supply volume of oil products shrunk by 50 percent, and within two weeks the Ukrainian government admitted its mistake." The gasoline price could be lowered by reducing the tax burden, he said. "Our efforts should be focused on the tax part of the gasoline price, in particular excises and mineral resource extraction tax." The deputy minister also said that a government resolution had been drawn up on motivating and organizing an exchange for trading in oil products.