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Alliance Refinery
Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number 26528
Company nameNNK-Aktiv, AO
Russian Federation
Sector1Oil Refineries
Environmental categoryB
Date SPI disclosedOctober 24, 2008
Projected board dateDecember 1, 2008
View Environmental & Social Review Summary (ESRS), click here
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Project description
OJSC Alliance Oil Company (“AOC” or “the Company”) is an emerging, mid-sized, independent oil company with a focus on downstream petroleum operations in Russia. As on the end of 2007, AOC’s revenues and EBITDA were $1.6 billion and $228 million respectively, with assets of $1.5 billion. The company’s key asset is its refinery in Khabarovsk (the Russian Far East). Geographically centered around the refinery, AOC operates an integrated logistics, wholesale, and retail distribution network for refined petroleum products, including a marine terminal in Vladivostok. The company also owns two small crude oil production assets in Tatarstan (Russia) and Kazakhstan.

AOC is investing about $1 bln in the upgrade of Khabarovsk Refinery. The project, which involves construction of a hydroprocessing complex (including a hydrotreater and a hydrocracker), will increase the refining depth of the refinery, allowing it to produce higher volumes of light petroleum products, improve the quality of its output to comply with Euro-4 standards, and increase its nameplate capacity to approximately 4.35 million tonnes per annum. Following the modernization AOC expects to process 3,5 to 4,5 mln tonnes of crude oil depending on market conditions.

The modernization of the Khabarovsk refinery is critical for AOC’s operations as it would not only make its products compliant with the Euro 4 product specifications, but also would allow the company to:

- capture the premium from production of higher value-added products from the same crude intake by decreasing output of dark products and increasing output of light products,
- satisfy the growing demand for higher-octane gasoline, low-sulfur diesel and high quality jet fuel, and
- access new export markets requiring higher fuel quality standards.

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