SMALL AND MEDIUM BUSINESS ON REGIONAL OIL MARKET

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1 SMALL AND MEDIUM BUSINESS ON REGIONAL OIL MARKET Maria Krasnova - Tatiana Krasnova Abstract: The article discusses the possible directions of development of small and medium-sized businesses in the oil market. The analysis showed that the oil market at the regional level is monopolized vertically integrated oil companies. For the development of an independent segment of the market to the entry of new business structures in both the wholesale and retail link, which requires government support in the form of public-private partnership Key words: Markets, business, vertically integrated oil companies, innovative development of oil refining, a public-private partnership JEL Code: L110, L130, L590, O 018 Introduction Oil and gas industry are among the basic sectors of Russian industry. Their stable functioning is crucial to the development of all segments of the national economy. The share of oil and gas in the energy balance of Russia is about 70%, in revenues from energy exports - more than 93% in the production of fuel and energy - about 55% in the industrial production of the country - more than 12% (Telegin, 2007). The structure of the oil and gas industry at the present stage is oligopolistic in nature and is characterized by a dominant market oil and gas companies operating in all market segments: mining and refining, storage, wholesale, small wholesale and retail sale of oil and gas products. Considering just the oil industry, it should be noted that during the years maintained a steady future growth of concentrations and reduce the number of independent market participants, as well as an increased presence in the markets of state-owned companies. In particular, continues to decrease the number of small independent oil producing companies and the amount of crude oil (from 1998 to 2008, the volume of production declined by half - from 10% to 5%). The number of independent gas stations over the past three years has decreased from 70% to 50%. (

2 In 2006, there was a takeover of Sibneft by Gazprom, and in 2007, at the auction held by RFFI in connection with the bankruptcy of Yukos, Rosneft acquired its main assets, effectively absorbing one of the leaders of the oil industry, and became the first vertically integrated mining, processing and export oil, in 2012, carried out an acquisition of TNK-BP. 1 The problems of small and medium enterprises in the oil market Business analysis industry shows that a high level of economic concentration and the presence of vertical integration caused by the presence of barriers to entry and cost-effective implementation of activities in the oil markets. The major problems faced by potential and existing market participants are ( - limited or no access to independent business organizations refining capacity; - restriction or lack of independent market participants to supply petroleum products in certain regions; - limited or no access to independent market participants storage capacity of petroleum products; - the presence of entities that dominate the market storage of petroleum products and simultaneously refined products; - the presence of a large vertically integrated administrative resources; - high initial cost. The presence of significant competitive advantage over non-integrated market participants to the acquisition of vertically integrated oil companies of significant market power, creates a high potential to affect not only the structure of the product market, but also have a significant impact on competition, the level, intensity and perspective on what it can result in significant negative social and economic consequences. Criticism in relation to economic policy VICs expressed by many analysts. In particular, the president of the Russian Union of NGOs "Motherland", the chairman of the Fuel and Energy Union Chamber of Commerce in Moscow Academy A.M.Volovik notes that oil companies carry out discriminatory measures against economic entities, not part of the largest vertically integrated oil companies, which leads to restriction of competition (Oil and Gas Business, 2008, 3. P.61-71). At present, we have a paradoxical situation where the wholesale prices of oil products almost above retail. It was also noted that in Russia the level of the motor fuel prices compared to incomes is incomparably higher than anywhere else in the world. At the session of the Government (March 2008) for the development of small and mediumsized businesses referred to the work on the actual destruction of VICs small business of discriminatory measures against the independent vertically integrated gas station outside the

3 VICs. Currently trying to buy up all the oil majors stations to control the prices, the introduction of a licensing system lobbying activity stations, canceled back in 2001 Analysts say that the sale of gasoline in most parts of the unprofitable and no additional service stations - service stations, car washes, tire store, shop independent tanker would have already been destroyed (Oil and Gas Business, 2008, p ). 2 Importance of small and medium-sized businesses in the oil product Creating a competitive market of petroleum products can be based on the conversion of the existing forms and methods of operation and interaction of market structures to provide the desired technical, economic and social outcomes at the regional level. The main direction of the development of market competition is, first of all, the ability to increase the number of its members. The most relevant is the expansion of small and medium-sized businesses to increase the overall volume of oil and the oil recovery factor due to small fields. Small businesses will be able to reduce the cost of refining petroleum products and increase competition in the wholesale sector. Increases in the proportion of independent operators promotes the stabilization of oil products in the region and reduce the risk of unjustified price increases for basic fuel (Efremov, 2008). The role of small companies in the formation of the competitive relationship is extremely important. Such properties of small and medium enterprises, as flexibility and the ability to rapidly update, allow him to compete in general big companies encourage their effectiveness. In order to create the most favorable conditions for small and medium-sized businesses are needed (Competition development program in the Russian Federation, 2009): - reducing the administrative burden; - simplification of state registration of tax reporting and accounting; - simplification and cost reduction process of accession to the energy infrastructure and utilities organizations; - making the real estate owned by the state and municipal property, including the implementation of pre-emptive rights of leased premises; - ensuring access by small and medium enterprises to public order, the natural monopolies and public corporations; - maximum information transparency to start their own businesses, including publication on a single internet portal reference information about the availability of state support. The most immediate challenge is to create and develop an independent market sector both in the wholesale and retail petroleum industry. First of all, to develop oil production, alternative to the big companies. Despite the fact that the Tyumen region is the largest oil-producing

4 region, it is forced to import refined petroleum products in the amount of 1.2 million tons (specify) from other regions of Omsk (550 km), Perm (600 km), Ufa (800 km). Almost all of the fuel imported into the region by rail. The transport component in the price of petroleum products is estimated at $ / t (specify). In the Tyumen region processing capacity available with the exception of diesel fuel, gasoline and fuel oil BT M-40, produced by JSC "Antipinsky Refinery" (Tyumen). We currently export refinery is 2/3 of the total volume of oil produced by the plant. In this case, the equivalent of the annual proceeds from the sale of 4 million tones of petroleum products corresponds to 2 billion dollars a year. The policy of export orientation will be conducted in the future. 3 Direction of development of small and medium enterprises in the regional market of petroleum products Despite the fact that the concept of long-term socio-economic development of the Tyumen region indicates that the region has the most favorable conditions for the development of production facilities for processing of hydrocarbons, a major program in this area is not provided, except along with the expansion of the refinery to construct a plant for the production of bitumen road construction (up to 80 thousand tons per year) in paragraph Bogandinsky. Source of raw materials, will deliver to the refinery. ( Currently, there are technological development, thus making greater depth of processing, high-quality oil products, adapting to the different composition of the feedstock. At the same time, the technology should be of sufficiently low capital intensity. Technology market offers a wide range of equipment and technologies for mini-refineries varying depth of processing both imported and domestic. Among domestic technology interest is, for example, Visbreaking TERMAKAT offering process to maximize production of diesel and gasoline. The main advantages of the new thermal processes: simplicity, reliability and low cost of hardware solutions for the deep conversion of heavy oil residues (Kurochkin, 2011, p. 4-13). In the retail market of petroleum products requires the development of small business is possible by increasing the independent gas stations. Retail market research and quantitative justification for construction of retail facilities made in (Fomichev, Chistyakova, Malyutina, 2011), where the proposed increase in the gas station, because of their scarcity in various districts of the region by more than 26% of the present number. Changes in the number of participants in the retail market may change the level of market concentration, and, therefore, improve the competitive environment.

5 The author offers the first phase construction of a mini-refinery next generation, including in existing independent oil depots. Development of our own oil (along with Antipinsky refinery), to a certain extent, will solve the problem of self-sufficiency in petroleum products in the region, especially high-octane. Research carried out by the author, showed that in the first stage (within 5 years) may build four high power processing capacity of raw material at the level of 200 thousand tons per year. In the future, we may consider an increase in capacity, technologies, and forming joint projects to achieve a deep processing of hydrocarbon raw materials. 4 State support for small and medium enterprises in the field of petroleum products The implementation of these proposals can t be implemented without the support of the state, reducing the barriers to entry into the industry, the smooth application of competition law. The government sees the private sector more resources and effective management. In partnership with the business to the state an opportunity to attract additional sources of funding, this reduces the burden on the budget and project management system that improves the efficiency of public spending. State while receiving their dividend in the form of increased tax revenue, to solve social problems and improve the overall level of production, increasing the competitiveness of products and services in the markets. Motivation to participate in the partnership of the public sector is to stimulate innovation businesses, the creation of new high-tech firms, support for small and medium enterprises. With the cooperation of government and private business more efficiently use the resources and expertise, as well as a separation of risk. Implementation of regional infrastructure and innovation projects in the refinery complex expediently carried out in the framework of public-government partnerships with co-financing through a special Investment Fund. Investment Fund of the Russian Federation, formed on 1 January 2006 in accordance with the Government of the Russian Federation on November 23, "On the Investment Fund of the Russian Federation" ( In accordance with the Government of the Russian Federation on October 25, "On some issues of structure and organization of the Ministry of Regional Development of the Russian Federation" function of providing state support from the Investment Fund of the Russian Federation The Ministry of Regional Development of the Russian Federation. The main purpose of the Fund - support for priority for the state and the regions of specific investment projects through the creation of transport, engineering or energy infrastructure of a

6 state or local significance, without which these projects can t be implemented. Fund projects selected under the public procedure, which provides for their consideration of the Investment Commission for the selection of projects eligible to receive budget allocations from the Investment Fund of the Russian Federation, followed by selection of the Government Commission for investment projects of national importance, and the approval of passports by the Federal Government. The procedure for selection of investment projects (Fig. 1). Fig. 1: The procedure for selection of investment projects The procedure for selection of investment projects The GDP growth (regional) product Revenues to the budget system of the Russian Federation Increase the level of employment Improve the quality and accessibility of public services Currently a Russian investment fund, new funds are planned as his counterparts at the regional level. Support for regional projects is an effective tool to improve the investment climate in the region and the development of public-private partnership. Ministry of Regional Development of Russia in working towards the formation of the federal budget for 2013 and the planning period of the Ministry of Finance will send a proposal to increase the amount of the Investment Fund of the Russian Federation and the allocation of 20 billion rubles. annually in order to co-finance regional public-private partnership, implemented through regional funds. Given the urgency of the development of independent business organizations in the regional market of petroleum products by offering to organize support for small and medium enterprises in the construction of mini-refineries. Conclusion Given the rapid growth of demand for oil products, the nature of the monopolized market, the lack of quality of automotive fuels, as well as features of the region, it is necessary to increase the market for petroleum products through the construction of small processing facilities within independent of both existing and newly built storage depots. This allows,

7 first, to increase the number, and, respectively, and the proportion of independent members of the wholesale market of oil products, and second, to encourage the development of small and medium-sized businesses in the third, to establish uniformity of oil products throughout the south of the region, in accordance with requirements of its prospects. In this case, the raw material can not only oil but also natural gas condensate. Development of small and medium enterprises in the field of petroleum products will: - improve the quality of processing; - focus on the active participation of the state in joint projects with oil and gas companies in the region; - to satisfy the domestic demand for petroleum products; - to provide innovative development of an oil refinery in the region. References 1. A. Efremov. Improving innovative mechanism of the local market of oil and oil products (for example, the Stavropol Territory). Summary of the thesis. on competition. Candidate. Econ. Science. - Stavropol, Kurochkin AK The depth of oil refining in Russia proportional to the depth modernization of domestic refineries. Environmental Bulletin Russia , 3. Pp Competition development program in the Russian Federation. Approved by the RF Government of , 691-p. 4. State motor fuel market in Russia (Problems and solutions). - Oil and Gas Business, 2008, 3. P Telegin DA Development of the quality management system of the vertically integrated company / dissertation for the degree of candidate of economic sciences. - Saratov, Fomichev PV, GA Chistyakov, Malyutina TV Creation of economic conditions for the effective functioning of local markets for automobile fuel. - Tyumen TyumGNGU, PPP ROSSIYA.RU: Information portal Contact Krasnova Maria Assistant professor on "The organization and management of production" "Tyumen State Oil and Gas University"

8 Work address: , Tyumen,. October 50, 38, Rm. 316 Work.tel. 8 (345) ; Mob krasnovami@gmail.ru Krasnova Tatiana PhD, Associate Professor of "Economics, Organization and Management" "Tyumen State Oil and Gas University" Work address: , Tyumen,. October 50, 38, Rm. 316 Work.tel. 8 (345) ; Mob tlkrasnova@yandex.ru