Russia's Lukoil says Volgograd plant operations unaffected by drone attack

Drone strikes targeting Russia's 314,000 b/d Volgograd refinery Feb. 3, in the latest Ukrainian offensive, have left operations unaffected, owner Lukoil said.

Local media and telegram channels showed images of a fire at the site, which the Russian authorities claimed was caused by a downed drone.

Volgograd Governor Andrei Bocharov confirmed the strike in a post on his Telegram channel, writing that "overnight, air defenses and electronic warfare systems repelled a UAV attack on the territory of the Volgograd Region."

"As a consequence, one drone fell and set off a fire at the Volgograd oil refinery," he said, adding that the fire was kept contained and no casualties taken.

In a statement Feb. 3, Lukoil confirmed that its gas rescue squad and the emergency services had eliminated a fire on a pipe in its ELOU-AVT-5 (CDU VDU 5) unit, with operations working normally.

Situated around 40 km from Volgograd, the refinery -- Lukoil's second-largest plant -- holds strategic importance for Russia as a key fuels producer for both the city and its military services. Additionally, the refinery services Russia's export markets by delivering diesel to to the Black Sea port of Novorossiisk via the Yug pipeline, road and river.

The plant's location, some 350 km from the Ukrainian border, would previously have rendered it off-limits for Ukrainian attacks in the eyes of many security experts. However, a series of military operations reaching deep into Russian territory has placed a growing number of refineries under threat.

With Ukraine now expected to have a drone range of about 1,200 km, around 3.2 million b/d of Russian refining capacity could be at risk of strikes.

Rosneft's 240,000 b/d export-oriented Tuapse refinery on the Black Sea was damaged by a drone strike Jan. 25, while suspected Ukrainian drones failed to damage Slavneft's 300,000 b/d Yanos refinery in Yaroslavl.

The additional reach of Ukrainian drones could place a renewed threat on the country's Moscow, Norsi, Yanos, Ryazan, Saratov and three Samara plants, alongside Taif, Taneco and the Astrakhan gas-processing plant.

As Ukraine appears to have doubled down on targeting Russian energy assets, critical Black Sea infrastructure, such as the Tuapse refinery and the medium-sized Afipsky, Novoskahktinsky, Ilsky and Slavynsky plants -- with a total capacity of around 500,000 b/d -- has also either been a target or could be a potential target in future attacks.

Chris Tooke, political risk director at J.S. Held, a consultancy, said the paradigm shift in Ukraine's military strategy could place both Russian domestic and export capacity at risk.

While attacks on domestic-oriented refining assets present a direct threat to Russia's security forces reliant on fuel, sustained pressure on export hubs affect Russia's reputation as a "reliable supplier" and maintain international focus on the conflict, said Tooke.

Russian gasoline exports in January were down 37% on the year, with diesel exports 23% lower, according to its energy ministry, citing unplanned refinery outages at Norsi and efforts to shore up domestic supplies.

According to S&P Global Commodities at Sea data, refined product loadings from export hubs have remained relatively resilient to strikes, however. In the week to Feb. 4, product loadings from Tuapse and Ust-Luga were around 130,000 b/d and 433,200 b/d respectively, above the full-year average for 2023 despite both sites sustaining damage from drone strikes. Figures exclude fuel oil loadings.