Why Ukraine's attack on Russian refineries could threaten global energy dynamics

Smoke billows after Ukraine's SBU drone strikes a refinery, amid Russia's attack on Ukraine, in Russia's Ryazan region. Reuters

People who live in glass houses shouldn’t throw stones, as the saying goes. Having waged a missile and drone campaign against Ukraine's electricity supply and heating plants from the outset of the war, Russia now finds its oil refineries on the receiving end of attacks.

When the Norsi refinery on the Volga River, east of Moscow, cut operations in January, owner Lukoil gave little explanation. Also in January, the Tuapse refinery, located near the Black Sea, and the Ust-Luga facility, a Baltic Sea export terminal near St Petersburg were damaged.

After an explosion on Tuesday, local authorities this time admitted that drones had bombed Norsi, which produces 11 per cent of Russia’s petrol, putting half of its capacity out of action.

The major Kirishi plant, run by Surgutneftegaz, has also been targeted several times this month. Ryazan, south-east of Moscow, suffered damage on Wednesday, although it continues to operate partially. On Saturday, the Syzran and Novokuibyshev refineries in the Samara region of south-eastern European Russia came under attack.

Ukrainian drones have now hit 13 Russian refineries since the start of the year. Some are reported to have been repaired, but, including Syzran, more than 500,000 barrels per day has been damaged, a 10th of Russian capacity.

Russian refining throughput has hovered between 5.5 million bpd and 5.9 million bpd over the past decade, or about half of its oil production. About 2 million bpd of refinery output goes to exports, the rest being consumed at home.

Of these exports, most is diesel, fuel oil and naphtha (a light petroleum liquid mostly used in petrochemicals or as input to petrol). Even prewar, Russia exported little motor petrol (or gasoline, as it’s usually referred to by the industry), and already banned its export in February.

The appeal of such attacks to Ukraine are clear. Refineries are large, fragile facilities full of flammable liquids and gases, which are easy to disrupt. Few civilians are likely to be killed. The loss of refining capacity doesn’t prevent Russia from exporting crude oil, therefore, it limits diplomatic pressure on Kyiv from other countries that might object to a spike in oil prices.

The Russian system is designed to export refined products, not to import them. Financial barriers and sanctions will make it difficult for Russia to source technically sophisticated spare parts. The attacks, therefore, may disrupt fuel supplies within the country, cost it money and divert air defence assets.

Russia’s refining capacity is concentrated in the western part of the country, where most of its population and industry resides. Having previously struck as far north as St Petersburg, the Ukrainians have shown they can hit almost any refinery west of the Urals. Eighteen refineries are within this range, holding 3.5 million bpd of capacity. The important Ufa complex, east of Samara, might be out of the 1,000km range of the latest Ukrainian drones – for now.

Russia has made battlefield advances in recent months, albeit at a high cost of lives. Ukraine’s stocks of artillery ammunition have run low. US Republicans are blocking a further package of military support, and a victory in November’s presidential election for Donald Trump would bring to power a president decidedly friendlier to the Kremlin.

On the other hand, Russia’s Black Sea fleet has been sunk or confined to port by drone and missile attacks. It has lost numerous warplanes, including airborne radar. If Kyiv comes under pressure from its western supporters to negotiate an unwanted ceasefire, or if its military situation deteriorates, it could increase its attacks on Russia’s petroleum sector.

The main Russian oil and gasfields are in West Siberia, a long way from Ukraine. Numerous dispersed wells and processing facilities mean it would be difficult to deal a decisive blow to production.

However, Ukraine has other options. For instance, it could target oil export terminals, with those around Novorossiysk on the Black Sea particularly vulnerable. It could hit pumping and compressor stations along oil and gas pipelines. Or, it could emulate Houthi forces in Yemen and strike tankers originating from Russia, perhaps using its new naval drones. It did hit oil and chemical tankers in the Black Sea with maritime drones in August, but does not seem to have repeated that approach – for now.

Such a shift in strategy would spread the impact of the conflict to international oil and gas consumers. It would be a diplomatically risky move, but understandable in extremis.

Ukraine’s use of drones expands a threatening trend for energy infrastructure, as I noted in October. In the Second World War, then in the Iran-Iraq War from 1980 to 1988, oil facilities were bombed. But bombers and missiles were expensive, inaccurate and vulnerable to being shot down.

Iran's organised attacks on the giant Abqaiq oil processing facility in Saudi Arabia in September 2019 changed that. Drones and guided missiles hit with great – and in this case, non-lethal – precision, putting the plant out of action without wrecking it. Subsequent strikes by Iran or its allied groups on gas operations in the Kurdistan region of Iraq have been calibrated as political warnings. The Houthis have used both drones and missiles against shipping in the Red Sea.

In the latest special refinery operations, numerous Ukrainian drones were shot down by Russian air defences, but enough got through to damage their targets. Their explosive payloads are small, not enough to cause devastation, but they can be guided to vulnerable spots such as gas compressors and distillation columns that take months to repair or up to two years to replace.

Attacking refineries won’t bring Russia’s economy or war machine to its knees. But it could bring domestic fuel shortages and spill over into international petroleum markets. Most importantly, it gives Kyiv some leverage, less against Moscow but more with its wobbly western friends.

Robin M. Mills is chief executive of Qamar Energy and author of 'The Myth of the Oil Crisis'