Save for later Print Download Share LinkedIn Twitter Moscow is incentivizing Russian oil companies to modernize refineries and squeeze more value from the bottom of the barrel. Thanks to recent agreements with firms like Rosneft and Lukoil, dozens of new conversion and upgrading units will be built and crank out more light products, particularly middle distillates, by the end of the decade. But the domestic market has little room for growth, so most of the new volumes will be exported. And since Europe, which currently soaks up over half of Russia’s products exports, plans to slash fossil fuel consumption, the rationale for Moscow’s investment push looks questionable. Diesel best illustrates the case. In January-July, Russia’s refineries produced 39.44 million metric tons (1.65 million barrels per day) of diesel and exported 25.88 million tons (1.08 million b/d), or 65% of all output, according to Russia’s customs data. International Energy Agency data for the same period show that OECD Europe imported 680,600 b/d of diesel — accounting for 63% of Russia’s diesel exports. If the modernization program is fulfilled, Russia’s diesel output will grow by nearly 20%, or some 350,000 b/d, to 2 million b/d by 2035. Gasoline output will also inflate by about 20% to 50 million tons per year (1.1 million b/d), which represents an annual surplus of some 14 million tons (305,000 b/d) over Russia’s domestic consumption. In motor fuels alone, Russia would add an additional surplus of 650,000 b/d because of the planned refinery build-out.