University of Transilvania Faculty of Economic Science and Business Administration

Rafo Onesti

Communication and public relation in busines Lect. dr. BALASESCU SIMONA Bostan Dana-Maria 8801,III year Business Administration

Table of contents:
1. History 1.2. Mission 1.3 Strategy 2. Crude Oil Logistics 3.Production Units 4.Modernisation Program 5. Marketing of the products 6. Conclusion 7. Bibliography

1.History

In 1964, Borzesti Petrochemical Group of enterprises was set up in 1956 based on a Governmental Decision. Refinery 1 Onesti was part of this group and the refinery processed domestic sweet crude oil In the period 1979 -1980 Refinery 2 was commissioned for processing imported sour crude oil. In 1991, S.C. RAFO S.A. ONESTI was registered as a stand-alone trade company in 1991, until 1990 being part of Borzesti Petrochemical Group of Enterprises. On 26.10.2001 the shares sale-purchase contract no. 10/26.10.2001 was concluded, based on which S.C. IMPERIAL OIL S.A. and CANYON SERVICOS LDA purchased 59.9960% of S.C. RAFO S.A. share capital. In 2002, by their resources, attracted in its the name or on a 5 years period, starting with the date of 30.06.2002 the shareholders made technological investments / capital contribution in cash or in kind worth USD 63,375,000 and investments worth USD 16,994,000 for environment protection. In 2004, On 11.10.2004, the novation of the share packages held by Canyon Servicos LDA and Imperial Oil towards Balkan Petroleum LTD took place, and thus Balkan Petroleum LTD became the major shareholder of SC RAFO SA. During the running of the privatisation contract, the shareholders made technological and environmental investments according to the obligations stipulated in the privatisation contract. On 25.08.2008 AVAS (The Authority for State Assets Recovery) notified the cessation of SC RAFO SA post-privatisation monitoring.

On 28.10.2009, the Central Depository registered a new structure of Rafos shareholding, as a result of direct shares transfer. Petrochemical Holding GmbH became the main shareholder holding 96.21% of SC RAFO S.A share capital. 2010 I. On 11.06.2010, the Central Depository registered the increase of Rafos share capital by means of a contribution in cash of Balkan Petroleum LTD, representing the counter-value of the environmental and technological investments undertaken and performed in accordance with the terms of the privatisation contract. Consequently, the shareholding structure was changed, Petrochemical Holding GMBH became the main shareholder with a percentage of 88.61%, Balkan Petroleum LTD holding 7.9%; II. On 21.06.2010, Brasov Court rendered the decision for closing the judicial reorganization procedure of SC RAFO S.A. III. On 11.08.2010, S.C. DEPOZITARUL CENTRAL S.A. registered the ownership transfer of a number of 69.409.780 shares issued by S.C. RAFO S.A. Onesti (representing 7,9056 % of the share capital) from the account of Balkan Petroleum Limited to the account of Petrochemical Holding GmbH, based on the provisions of the art. 81, letter g4 of the C.N.V.M. Regulation no. 13/2005, with the following amendments and additions and of the C.N.V.M. Certificate no. 121/05.08.2010. Thus, the shareholding structure of S.C. RAFO S.A. was amended, Petrochemical Holding GmbH becoming the holder of 96,5141% of RAFOs shares.

1.2 Mission
RAFOs mission is to provide by means of energy generation, the quality of everyday life of individuals, generating value for stakeholders, customers, shareholders and for the activity fields in which it operates. The primary purpose consists in maintaining RAFOs position as an integrated oil processing asset. Through its performance and technological development RAFO should become the focal point and the centrepiece of the Romanian petrochemical industry recovery.

1.3 Strategy

A key trend, which has affected RAFOs historic profitability and its plans for the future is Europes turning to diesel and a decrease in gasoline consumption, given the higher efficiency of diesel engines compared to those running on gasoline. This is the reason why Rafo has decided to stop producing gasoline and focus our strategy in the field of Petrochemicals and Euro V Diesel. Petrochemicals have enjoyed good profitability in recent years. The demand for propylene, benzene and PX has grown significantly. From RAFOs point of view, by eliminating gasoline production we now no longer have to face the production/marketing challenge faced by many European refiners. Consequently, the key aspects of the transformation programme are the following: To relocate a delayed cooker from nearby Darmanesti (located 40 kilometres from Onesti). This will eliminate the production of low value fuel oil and allow the conversion of all residues produced at Onesti into light products and petroleum coke for the Romanian domestic market. To improve the quality of diesel by means of conforming with Euro V standards (10 ppm sulphur).

 To revamp the FCC in order to maximize the output of aromatics and propylene. This project is important for the process of replacing the gasoline production by paraxylene, benzene, propylene and raw material for steam cracking. To build a new state of the art aromatics complex, minimizing investment costs by making maximum use of the existing equipment.

2. CRUDE OIL LOGISTICS

Rafos first two distillation units had a capacity of only 1.5 Mtpa each and were used to process Romanian domestic crude. A third and much larger tower (3 Mtpa) was subsequently added. The latter CDU is now the only distillation unit in operation. Under RAFOs modernisation scheme, it will process 2.6 Mtpa of imported URALS crude. All of the major inland refineries in Romania are supplied with crude from the deep-sea terminal at Constanta, on the Black Sea. Several pipelines start from Constanta to Baragan. In turn, a 50 cm diameter pipeline supplies Onesti refinery from Baragan. This latter pipeline has more than enough pumping capacity for RAFO to run at 2.6 Mtpa.

3.PRODUCTION UNITS
1. The main production units - DAV - Atmospheric and Vacuum Distillation Unit - 3,5 mil tons/year - PHB Gasoline Hydrofining Unit - RC2 Catalytic Reforming Unit - HM, HP, HM2 - Gasoil Hydrofining Unit - HDV Vacuum Gasoil Hydrofining Unit - CC3 Catalytic Cracking Unit - Hydrogen Plants - Ethers Unit (MTBE and TAME) - DGRS Gas Desulphurization and Sulphur Recovery Unit, used waters stripping - FGR Gas Fractionation Unit - Flare Farm - Own production utilities: steam, technical and instrumental air, nitrogen, cooling water - Used waters mechanical-chemical and biological treatment station - Crude oil, finished and half-finished products, liquid gases storage tanks - Truck and railcar loading racks - Crude oil and other raw materials unloading rack

2. RAFO also has 2 aromatics sections in preservation - Aromatics extraction separation (2 lines) - Paraxylene separation (it includes ortho-ethyl benzene separation, methaxylene isomerisation, paraxylene separation by absorption)

3. Main projects in progress - Increasing the capacity of the delayed coking unit up to 650 kta - Euro 5 fuels related projects - Block of Aromatic Units with Paraxylene- 411 kta and Benzene - 233 kta

4. MODERNISATION PROGRAM
Concept

In 2008 the program for the modernisation and revamp of Rafo refinery was initiated. The goals of RAFOs modernisation are: reverting to gasoil petrochemicals production, in order to process 2.6 million tons of crude oil per year, eliminating the gasoline production and obtaining EURO V gasoil. According to the gasoil aromatics flow sheet the total investment for refinerys modernisation amounts to EUR 330.000.000 and includes: Increasing Cokers capacity up to 650.000 t/year. Modernisation and modification of the operational status of FCC unit, by using UOP technology. Implementation of Aromatics Complex, using GTC technologies and licenses.

 Increasing the capacity of Hydrofining using Axens technology (France), Gases Desulphuration and Sulphur Recovery units using Le Gas Integral technology (France), in order to comply with EURO V standards. Other utilities projects. All design solutions are based on the most efficient technologies, on their application, as well as on the maximum utilization of the facilities and of the equipments existing within the refinery. Such an approach will enable the decrease of the investment costs by 2,5 times as compared to the Greenfield type projects (new constructions) and it allows reaching the maximum complexity and increasing crude oil processing degree aromatics production yields will represent 25% of the processed crude oil quantity. All products obtained as a result of this project will be traded in Romania or in the European Community. It is estimated a steady increase in terms of the specific refining products consumption gasoil and liquefied gases. The petrochemical products (propylene, benzene, paraxylene) are not distributed only on the European market, they could become feedstock for the further development of the complex, and the liquefied gases together with the raffinate will represent the best feedstock for the pyrolysis plants. The investments feasibility study was carried out for 4 crude oil price options and the price of 60 dollars per crude oil barrel was taken into consideration as a basic option. According to the investments feasibility study the average yearly sales will be of 1,5 billion dollars, with EBIDTA of 186 million dollars per year. Thus, both the utilization of the efficient technologies and their combination within RAFO refinery will represent a first time implementation in Europe and this will enable the creation of a new petrochemical complex, more economically efficient and durable considering the market changes. Since February 2008, the works necessary to implement this project have been performed (engineering and construction works, order and deliver y of facilities and equipments). The Romanian Government also supported this concept because the project called The modernisation and rec onstruction of RAFO refinery into a petrochemical complex with aromatics production may constitute a basis for reviving Romanian petrochemical industry. In this respect, RAFOs management took the necessary steps in order to contract

a loan with state guarantee. This governmental guarantee does not represent a state aid and will be contracted taking into account the market conditions, namely: The amount of the state guarantee will constitute 80% of the credits total value (amounting to Euro 330 million) The guarantee will be granted based on an undertaking; RAFOs shares and/or assets will be used to pledge the guarantee

5. Marketing of the products

DIESEL Planned production: 1,080,000 MT per year Markets for RAFO: Romania, Bulgaria, Moldova, Ukraine, Slovakia, Serbia Domestic market volume approximately 5,000,000 MT per year Domestic market growth: (2002 -2007) approximately 7% Main consumption sectors: automotive vehicles, agriculture, railway tran sportation Distribution: by railway, by trucks

AROMATICS Paraxylene (PX) is used primarily as a feedstock for the manufacture of purified

terephthalic acid (PTA) which is an important chemical in the production of fiber and plastic bottles Planned production: 414,000 MT per year Markets for RAFO: Continental Europe, Turkey and CIS countries European consumption: 2,396,000 MT per year

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Market growth: approximately 13% in 2010 Consumers: PTA and DMT produc ers

BENZENE Benzene is the basic petrochemical feedstock used for producing a wide range of Planned production: 233,000 MT per year Markets for RAFO: Conti nental Europe, Turkey and CIS countries European consumption: 11,500,000 MT per year Consumers: petrochemical companies (mainly MDI and Polystyrene producers)

products such as polystyrene, MDI (polyurethane component), polyamides, etc.

PROPYLENE Main fields of utilization are: polypropylene, propylene oxi de (polyurethane Planned production: 100,000 MT per year Markets for RAFO: Romania, Continental Europe European consumption: 4,000,000 MT (CIS not included) Consumers: domestic market and European customers of petrochemical products

component), phenol and acetone

LPG Planned production: 262,000 MT per year Markets for RAFO: Romania, Serbia, Bulgaria, Moldova Domestic market volume: 300,000 MT per year, total capacity approximately 1,000,000 Market growth: (2008 -2010) approximately 5% Main market sectors: automotive vehicles, households, Ethylene Crackers

MT per year. (Ethylene Crackers not included)

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OTHER PRODUCTS

Naphtha Planned production: 283,000 MT per year Markets for RAFO: Romania, Serbia, former USSR, Hungary Consumers: domestic and foreign markets

Coke Planned production: 157,000 MT per year Markets for RAFO: Romania (domestic market), export

Sulphur Planned production: 23,00 0 MT per year Markets for RAFO: Romania, export . Consumers: fertilizers producers and other fertilizers producers: North Africa .

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FUEL DISTRIBUTION STATIONS

The network of fuel distribution stations will ensure full usage of the advantage that made the difference between markets offers and will provide the possibility of segmenting the market more deeply. On its turn, this will increase the precise adaptation of the companys strategy to the consumers preferences from each segment. The distance between the stations and the main regional or national roads or highways, residential areas or competitors existing fuel distribution stations may be used as segmenting criteria. Such sales strategy will definitely broaden the area and the number of consumer groups. Until recently(2011), Rafos retail sales were carried out through 33 old fuel distribution stations; in addition, the products were distributed to 258 fuel distribution stations belonging to other persons and companies. Deliveries were made either directly from the refinery or from the four storage facilities held by the company in Brasov, Oradea, Cluj Napoca and Craiova. The fuel distribution

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stations should have sale points and the necessary infrastructure for providing additional services to the customers. The construction of such fuel distribution stations will allow the company to rent these sale points and service centres, the employment of additional personnel than the one already employed to provide the usual commercial services to the customers not being necessary. The rent fee received from these sale points will cover the personnel costs and the expenses related to the normal operation of the fuel distribution stations.

Problems on Rafo Onesti:

Corneliu Iacobov sentenced to 7 years in prison over Rafo Onesti fraud after previous exoneration The Bucharest Court of Appeals sentenced business people Corneliu Iacobov and Toader Gaurean to seven and six years in prison, respectively, for defrauding the RAFO Onesti oil refinery. The Court also sentenced Marin Marin to seven years in prison, for abuse of office, and acquitted Liliana Luchian and the other defendants, charged with money laundering. Iacobov, Gaurean and Marin have been ordered to pay EUR 4.3 mln to RAFO and RON 7,000 each in court expenses to the state. In 2005, prosecutors indicted Iacobov, Gaurean, Luchian and Marin on charges of abuse of office, money laundering, criminal organization and false testimony, respectively but they were acquitted in 2008 by the Court of Bucharest, on the grounds that their alleged crimes are not stipulated in criminal law or do not exist. The ruling was challenged by the prosecutors. Rafo Onesti would work free of charge for Petrom to pay its debts The "Rafo" refinery might pay its debt to "Petrom" (almost ROL 1,500 billion) processing free of charge the crude oil in the Moldova basin for "Petrom", during the next three years. Mr. Paul Ivascu, general manager for "Rafo", declared that this is a perfectly viable project, it was already submitted to "Petrom" which is inclined to agree. According to this plan, "Rafo" agreed to work for free one week per month, on behalf of "Petrom", for three years. According to our sources within the Ministry of Economy and Commerce, the main shareholder of "Petrom", the company might take advantage of its real estate guarantees in "Rafo", reaching
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ROL 1,550 billion. The same sources confirmed negotiations with "Rafo", but, according to them, negotiations are still ongoing. Anyway, the problem of "Rafo" debts towards "Petrom" is expected to be solved before the privatization of the latter. Several companies of the Tender Group took over "Rafo" debts last year, committing to pay through services. Mr. Paul Ivascu stated that "Rafo" requested this deal to be suspended for three years, allowing "Rafo" to pay its debts to "Petrom" by its own means. By the end of this month, "Rafo" shareholders will meet to debate on some proposals issued by managers concerning the acquisition of several assets, in order to set up a network of gas stations. The "Rafo" strategy for the next two years includes a network of 80 gas stations to be built (approximately USD 45 million), plus several local fuel ware-houses. Shareholders will also decide on "Rafo"'s participation in the equity capital of "Top Oil". The other shareholders are "Tender" SA (50% of the equity capital) and VGB Invest (40% of the equity capital). VGB Invest is also shareholder in "Balkan Petroleum", currently owning 90% of "Rafo". The "Rafo" managers also proposed to sell stakes owned by the company in "Rafo Trans" SRL and "Iaco Invest" SRL. 22.10.2010

The court rejected the bankruptcy of RAFO Onesti Brasov Court rejected the company's bankruptcy RAFO Onesti. Court ordered the judicial reorganization and closure, which means that the company can return to economic activity, according to Bogdan Paraschiv associate lawyer quoted the truth. The decision was taken after 11 days of deliberation by the sentencing Brasov Court dismissing as unfounded complaints made about the closing of the reorganization procedure.

The company also withdrew its application Refinery Darmanesti appeal. The Court granted the application and ordered the closure of the judicial reorganization procedure to RAFO. Under the law, judicial reorganization procedure applies debtor is a legal entity and to pay its debts
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according to a payment schedule of claims. Reorganization procedure closes the sentence after meeting all the liabilities assumed in the plan of reorganization confirmed by the bankruptcy judge. Rafo went insolvent in 2004, being at that time the largest debtor to the state. In 2008 work was stopped, in order to reorganize.

6.Conclusion

Rafo Onesti has come, during 2004 - 2010, a program of reorganization, during which he paid all trade payables and budget. Refinery is stationary in April 2008, but has all the technological equipment necessary in conservation. Since the summer of 2008, the majority shareholder and the administration have initiated a project to modernize investment, but which needs state support. The project reached 330 million, and the project implementation in 19 months. Thus, Nelson index (which indicates the complexity of the installations, the processing of crude oil and semi-deep) would increase to about 9-14. Restart the refinery would lead, however, and the creation of the strongest integrated petrochemical complex in Eastern Europe. Rafo would handle three million tons of oil annually, and develop business Compet Oil Terminal and other service-providing units horizontally. Rafo will not produce commercial gasoline, but materials for petrochemicals. For the production of oil, coke and sulfur are sufficient market. Technological food chain that would keep Rafo All units would benefit RAFO development can achieve commercial links would not work even if the integrated structure. These would be Oltchim forthe including pyrolysis plant Arpechim Chimcomplex - who would develop two new plants, Carom - which will take a significant share of products RAFO, increasing the production of rubber and other technologies on which Products resulting demand by domestic and foreign, and Thermal UTON. "All aspects

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summarized - said Ion Marian - have been the subject of studies and analysis specialists at large and the RAFO project analysis that the unit will operate on the basis of maximum efficiency, and the units will work in collaboration with the RAFO, regardless of type, will profit. Virtually all economic and social activity Borzeti platform, including developing and populating Onesti, it achieved by RAFO existence. "

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Bibliography:
1. Ziarul de Bacau: http://www.ziaruldebacau.ro/2013/03/01/rafinorii-din-onesti-se-intalnesc-cu-premierulponta.html 2. Rafo Onesti http://www.rafo.ro/ 3.

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