Attacks on oil refineries and sanctions are exacerbating Rosneft's financial problems — Bloomberg

Representatives of the Russian oil company Rosneft have expressed concern that even a continuation of the war against Ukraine for just a few more months could cause long-term damage to the company’s entire business. The agency believes that the mounting losses suffered by Rosneft and the Russian oil industry as a whole explain why Moscow is trying to bring an end to Ukrainian strikes on oil refineries.

Rosneft’s financial condition is deteriorating: profits are shrinking, and its debt burden is growing. This is evidenced by conversations with sources familiar with the situation at the company, expert assessments, and documents that Bloomberg has reviewed over the past six months. In particular, these documents contain damage assessments and plans for protecting and repairing the refineries.

- Rosneft has suffered significant losses due to Ukraine’s campaign of strikes against oil refineries. The company operates 12 refineries, which account for about one-third of Russia’s total oil refining capacity. According to Bloomberg’s calculations, of the 15 confirmed drone attacks on Russian refineries in September, five targeted Rosneft facilities that supply fuel to the European part of Russia.

- One of the facilities hardest hit by repeated attacks was the Ryazan refinery, which supplies fuel to Moscow and neighboring regions. After the first strike in May, the plant was idle for more than half the time, and when it was operating, its utilization rate was significantly below design capacity. The Syzran Refinery has either been completely shut down or operating at less than one-third of its capacity for most of the past six months. The Tuapse Refinery has been out of operation since April, according to Bloomberg.

- Rosneft managed to resume operations at some refineries just a few weeks after the attacks. However, once repairs were completed or nearly completed, the facilities came under attack again. The constant repair of damaged equipment places an additional burden on the refineries and increases costs. According to sources familiar with the situation, company representatives have informally warned that it will be impossible to maintain such costs at an acceptable level in the long term. As a result, repairs at some plants were deliberately slowed down: work that was supposed to take a few days was stretched out over weeks.

- Attempts to protect the facilities using shipping containers, nets, and steel cables did not yield the expected results, Bloomberg reports. It is particularly difficult to restore damaged oil refining units, specifically catalytic cracking, reforming, and hydrocracking units. Previously, the necessary parts were purchased from the West, but sanctions have restricted access to spare parts. Now Rosneft is forced to use Russian equivalents and components from China. Delivery times can take months, and some parts are not always compatible with existing equipment.

- The company’s financial performance is also deteriorating. In the first half of the year, Rosneft’s net profit fell by nearly 20%—to 200 billion rubles, or $2.4 billion. At the end of June, the ratio of net debt to EBITDA—earnings before interest, taxes, depreciation, and amortization—rose to 1.8. According to Bloomberg, this is the highest level in more than five years.

- The Qatar Investment Authority (QIA), which owns 18.4% of Rosneft, is closely monitoring the company’s financial situation and the extent of damage to its infrastructure. According to three Qatari officials familiar with the situation, the fund’s dividend payments from this investment have been significantly reduced during the war in Ukraine.

- Signs of financial trouble have also emerged at the Moscow Credit Bank (MCB), which market participants consider to be close to Rosneft CEO Igor Sechin. According to Bloomberg, the bank is facing $8 billion in non-performing loans.

Context: Against the backdrop of losses at Russian oil refineries, Moscow is trying to pressure U.S. President Donald Trump to halt Ukrainian strikes on oil refineries.

Bloomberg reports this, citing its own sources.

Rosneft announced the launch of the Vostok Oil Arctic project.

Ukraine attacked an oil refinery in the Ryazan region—Asharq Al-Awsat.

Rosneft has banned the sale of gasoline in canisters.