Russia's Tuapse refinery hit by first major drone strike in over a month

Russia's Tuapse refinery on the Black Sea caught fire after a drone strike July 22, local authorities reported, leaving infrastructure damaged after the first major Ukrainian drone strike in over a month.

A fire was extinguished at the Rosneft-owned refinery around 0800 July 22, Krasnodar administration reported via Telegram. Damage to the refinery remains unconfirmed, however the fire engulfed an area of around 50 square meters, it said.

The strike marks the third attack on Tuapse this year, with the 240,000 b/d acting as a key outlet for refinery feedstock exports. An attack Jan. 25 left the plant's VDU damaged for several months, extending existing maintenance plans, while a later May 17 attack was brought online within a month.

Tuapse primarily exports feedstocks such as naphtha, fuel oil and VGO. In the week to July 14, it exported some 111,200 b/d of fuel oil, the highest level since October 2023, according to S&P Global Commodities at Sea data.

The strike activity signifies a significant escalation in Ukrainian attacks, which have mostly concentrated on oil storage depots in central and southern Russia over the last month. The last attack on refining operations was June 21, when an administrative building at Russia's Ilsky refinery was targeted, though it appeared to avoid damage to its operations.

More recent attacks targeted oil storage facilities in Russia's Oryol and Rostov regions July 13 and July 15, in activity aimed at impacting strategic fuel reserves for Russia's military as Ukraine has struggled to hold ground on the front line, according to analysts.

As a result, Russia's refining activity has returned strongly from March/April, when swathes of capacity were left impacted by drone damage, though insecurity around domestic fuel availability has prevailed. Despite a lull in drone strike damage to refining operations over the last month, the Russian government has pushed ahead with plans to reimpose an embargo on gasoline exports to conserve supplies.

Concerned by rising prices and the supply impact of upcoming fall maintenance season, Russia's Federal Antimonopoly Committee (FAS) advised July 12 that a gasoline export ban initially intended to last until Aug. 31 should be reinstated Aug. 1-31, while provisions are reportedly being made to enforce new legislation preventing resumed flows from Sept. 1 in a second ban expected to last into October.

An uptick in Ukrainian drone strike activity, which had previously reached as far as 1,300 km into the Russian territory, could add momentum to tighter controls, while risking significant upside to the ICE LSGO complex, analysts said.

The Russian government has so far abstained from imposing restrictions on diesel exports in 2024, assuring that its production is almost double domestic demand, though flows were temporarily banned in September 2023.