INTERVIEW: Gazprom Neft remains upbeat on Russian jet recovery in 2022

Russian oil company Gazprom Neft's jet fuel subsidiary Gazpromneft-Aero is maintaining its positive forecast for the recovery of Russia's aviation market amid rising domestic tourism growth, CEO Vladimir Yegorov told S&P Global Platts in an interview.

Russia's jet recovery has been ahead of the global one, according to Gazpromneft-Aero estimates, despite several waves of coronavirus.

"This year, the domestic passenger traffic is forecast not only to return to the pre-pandemic level, but also slightly surpass it. The positive forecast also applies to the aviation fuel market," Yegorov said.

Domestic demand for jet fuel in the first nine months of 2021 almost reached the pre-pandemic level of 2019, totaling 5.5 million mt, according to the company's data.

"The development of domestic tourism and subsidies for passenger air transportation, as well as the growth of cargo transportation, played a significant role [in recovery]," he said.

Russia 's Federal Air Transport Agency previously forecast full recovery of the domestic market by 2023, a year earlier than the global market.

In November, the number of passengers traveling via domestic flights exceeded the volume seen in November 2019 by 10%, according to the agency.

At the same time, S&P Global Platts Analytics forecasts Russian jet fuel demand to remain under pressure in the first half of 2022, averaging 185,000 b/d compared to 217,000 b/d in the same period of 2019.

During the pandemic, Gazpromneft-Aero managed to maintain sales volumes of jet fuel, partially due to refueling of cargo flights to Europe and Asia, and even increase sales by 26% on the year to 2.7 million mt in the first nine months of 2021.

"We were able to maintain sales growth rates this year at the same level, primarily due to cargo transportation and increased passenger mobility. The high season, however, is almost over," Yegorov said.

In 2021, the company increased jet fuel sales in Russia and abroad, including in the UK, Slovenia, Malaysia, Sri Lanka and the Philippines, he added.

"I can say with confidence that we have managed to adapt to the current reality," Yegorov said.

Gazpromneft-Aero continued to monitor the global fuel market as it was also affected by the volatility seen in the oil and gas markets, he said.

Jet fuel prices in Russian airports have soared by almost 30% since the beginning of 2021, according to the Federal Air Transport Agency.

Platts assessed jet CIF NWE at $696/mt on Dec. 24, up 58.5% in the year to date.

"Everyone understands why this is happening...The market is quite volatile now – oil, gas, kerosene, everything is interconnected," he said.

The coronavirus crisis pushed the aviation industry to increase efficiency, Yegorov said, and Gazprom Neft-Aero launched in 2021 the Smart Fuel blockchain platform that was first tested in 2018 and would optimize in-wing refueling services.

In the long term, the company is keeping its strategic goal to become one of 10 largest aviation fuel providers worldwide by 2030.

"We plan to practically double our retail sales in Russia and increase them fivefold abroad, we have a significant room for growth," Yegorov said.

SAF in Russia

In September, Gazprom Neft and Russia's state carrier Aeroflot agreed to work together on producing Russia's first minimum-carbon-footprint sustainable jet fuel that can reduce air travel greenhouse gas emissions by up to 80%.

The company's green fuel alliance with aviation industry leaders and research institutes formed earlier this month plans to conduct the first flight using biofuel no later than 2024.

"Our task is to be ready for this, we must develop new standards for refueling domestic and foreign aircraft with green fuel. We have already started working with specialized research institutes and will be fully ready when SAF is used in Russia," Yegorov said.

Yet, in his opinion, Russian airlines will transition to SAF only by 2027, when ICAO's CO2 emissions standards come into force.

"Of course, airlines would like to be ready by 2024, but this is a relatively short time frame for production," he said.

"Research, design work and infrastructure construction will take some time and, in my opinion, will be ready by 2027. By that time, it will be necessary and in demand," he added.

In 2022, Gazpromneft-Aero plans to expand refueling with new high-tech aviation fuel Jet A-1 produced at Gazprom Neft's Omsk refinery and later shift to SAF, test batches of which will be produced at the Omsk and Moscow refineries.