The Slovak government is interested in continuing the uninterrupted operation of the Slovnaft oil refinery plant near Bratislava, whose products dominate the fuel market of the Slovak Republic and occupy an important position in the regional market. The basis of Slovnaft’s profitability is the use of Russian oil. Taking this into account, the Slovak side consistently advocates at the EU level the need to postpone the implementation of Western sanctions against the oil sector of the Russian Federation and to continue the supply of raw materials through the southern branch of the Druzhba main oil pipeline.
At the moment, the government of the Prime Minister of the SR Robert Fico acts within the framework of the agreement with Brussels regarding the possibility of using Russian oil from the Slovnaft refinery until December 5, 2024 and selling the plant’s products on the EU market, in particular in the Czech Republic.
Additional revenues to the Slovak budget are provided through targeted taxation. It should be noted that despite the EU-recommended level of tax on the use of Russian oil up to 33% of revenue, the government of the SR collected an additional 55% of Slovnaft’s revenue in 2022, making the Bratislava refinery the largest taxpayer in the country (€628 million). During 2023, having introduced the so-called “solidarity tax” at the level of 70% of Slovnaft’s revenues, the Slovak government received up to EUR 1 billion in additional revenues (up to 5% of budget revenues). In turn, Fico’s government extended the special tax at the level of 70% until the end of 2024.
In turn, the management of the Hungarian energy holding MOL Plc. and its Slovak refinery asset Slovnaft plan to use Russian oil in the medium term. Postponing the transition to raw materials from non-Russian sources also allows MOL/Slovnaft to maintain a dominant position on the Slovak fuel market and retain a significant share of the regional market. Currently, Slovnaft processes 30% of alternative types of oil and 70% of Russian Urals oil.
In these conditions, the investment plan for the limited conversion of the Slovnaft refinery and the replacement of up to 60% of Russian raw materials with other types of oil is being implemented, calculated for the period until 2027, with a cost of up to 200 million euros. As part of the modernization plan, on February 16, 2024, the Slovnaft company submitted for consideration by the Slovak permitting authorities a project worth 10 million euros for reconstruction during the II quarter of the current year distillation line AVD6. The line is one of the key nodes of refinery production (gases, gasoline, kerosene, light fuel oil are separated from oil) and is currently specialized for the processing of Russian oil with a high sulfur content and the production of diesel fuel. American WTI oil and Kurdish KBT oil have been identified as potential alternative raw materials for the refinery.
In addition, the stability of the operation of the Bratislava refinery will depend on the decisions of the parent company MOL Plc. (the Hungarian government controls over 53% of the holding’s property rights) in conditions of intra-corporate competition for available resources. The only alternative route for the supply of raw materials for the Slovnaft refinery is the Adria Balkan oil pipeline (capacity up to 20 million tons per year) through the Croatian port oil terminal Omišalj on the island of Krk (capacity up to 34 million tons per year). Despite the fact that the annual needs of Slovnaft in raw materials do not exceed 6 million tons, the high level of competition of Croatian, Serbian and MOL group refineries for the limited capabilities of Adria (Croatian refineries Sisak, Rijeka – up to 4 million tonnes per year; Serbian refineries Pancevo, Novi Sad – up to 8 mtpa; Hungarian refinery Danube Refinery – up to 8 mtpa), lack of contractual obligations prevents reliable supplies to the territory of Slovakia from the world oil market.
