Repairs at the NOVATEK plant in Ust-Luga will take up to two months

According to Kommersant, restoration of the technological process after a fire at the NOVATEK condensate processing plant in Ust-Luga may preliminary take up to two months. The company has already resumed loading petroleum products from the terminal, but we are talking about the volumes that were produced before the fire. The plant in Ust-Luga provides up to a third of naphtha sea exports from the Russian Federation. Analysts differ in estimates of the company’s losses, which mainly depend on the duration of the plant’s downtime: BCS estimated the cost of a day of downtime at $2 million.

It may take up to two months to eliminate the consequences of the fire that stopped fuel production at the NOVATEK complex for transshipment and fractionation of stable gas condensate in Ust-Luga. This opinion is shared by Kommersant’s sources familiar with the first assessments of the consequences of the fire. NOVATEK did not comment on this information. “The consequences are not critical, the raw material (stable gas condensate.— “Kommersant”) continues to be exported, the estimate of repair time is still very preliminary,” says one of Kommersant’s interlocutors.

On the night of January 21, a fire occurred at the NOVATEK terminal in Ust-Luga as a result of two explosions caused by “external influence.” The fire was extinguished the next day, resulting in damage to two tanks and a pumping station. Due to the fire, the company stopped technological processes at the fractionation unit (separates stable gas condensate into fractions, consists of two technological lines with a capacity of 3 million tons each). Immediately after the incident, the company reported that it would later assess the damage; there was no official information about its volume.

The company resumed shipments from the site on January 24: two tankers – Chrystal Arctic and Minerva Julie – are moored near the NOVATEK terminal. Minerva Julie began loading on January 19, but departed from the terminal for several days. It is not yet clear what category of products are being loaded onto the tankers, but it is likely that we are talking about petroleum products produced before the fire.

The complex in Ust-Luga, where petroleum products are produced from stable gas condensate – light and heavy naphtha, kerosene, diesel fractions – was launched in 2013. Its rated capacity is 6 million tons per year. The company was building a plant to monetize its own gas condensate produced in the fields of Western Siberia and Yamal. All products are shipped for export by sea.

After the launch of hydrocracking in 2023, the company completely got rid of fuel oil production, producing only diesel fractions. Next to the plant there is a terminal for sea shipment of petroleum products and stable gas condensate.

NOVATEK on average processes 600 thousand tons of gas condensate per month, about 70–75% of the output is naphtha, 15% is kerosene and less than 10% is the diesel fraction. “This is why the plant is so important for Russian naphtha exports, in fact providing a third of all export volumes by sea,” notes Victor Katona from Kpler. According to Kpler, in 2023 NOVATEK sold about 6.4 million tons of finished products from the site, exporting 3.7 million tons of naphtha, 1.2 million tons of jet fuel, 964 thousand tons of stable condensate and 187 thousand tons of gasoil. The largest buyers of naphtha from the plant are Taiwan, China, Singapore, Malaysia and the UAE.

A complete shutdown of the technological process at the Ust-Luga complex could cost NOVATEK $2 million per day, Ronald Smith from BCS World of Investments estimated in an analytical note. The analyst estimates that if the site returns to work within a few weeks or, in the worst case, months, one-time losses could amount to 2-3% of EBITDA. While the plant is shut down, NOVATEK will be forced to sell condensate, losing processing margins, Mr. Smith adds.

Sergei Kondratyev from the Institute of Energy and Finance believes that the damage caused will not have a serious impact on the operating activities of the enterprise. The cost of replacing damaged tanks, according to his estimates, is unlikely to exceed 20 million rubles, and Russian manufacturers will ensure prompt delivery. “The question of the cost of the pumping station is more complicated; the company does not specify the scale and nature of the damage, but I don’t think that the costs will exceed 100 million rubles,” says the analyst. In his opinion, the launch of the plant at reduced capacity may occur in the near future, and the total losses will amount to no more than $12–15 million, that is, less than 0.2% of the projected EBITDA for 2024.

Tatiana Dyatel