The State of the Economy

5.4.3. The State of the Economy

While Plant staff indicate that they make a healthy contribution back to State – the plant is the largest taxpayer in the country, with its taxes equivalent to 5% of the annual State Budget – the country’s economic situation is not as positive. As noted by the Energy Information Administration¹⁾:

Belarus has refused to implement political and economic reforms since the collapse of the Soviet Union... [Belarus suffers from high inflation,] and although the official unemployment rate is approximately 2.3%, the actual figure is believed to be much higher. Nevertheless, the country's real GDP grew by 4.1% in 2001, with a projected 4.6% increase in 2002.

Thus, amidst high inflation and trying economic conditions, there has been some expansion in the economy – largely fuelled by export growth.  It is further noted that with respect to the petroleum sector:

Belarus has a small oil industry, and the country produced 37,000 bbl/d of oil in 2001.  The country has 198 million barrels of oil in proven reserves, but the lack of political and economic reform in the past decade has hindered the entrance of any foreign investment to the sector in order to help boost production.

Belarusnafta, the state-owned oil production monopoly, estimates that active oil deposits may last for another 17 years, with more difficult deposits (e.g. those with a water content of over 80% or with high viscosity) lasting for 34 years, taking into account the company's plan for oil extraction will remain around 40,000 bbl/d.  On December 6, 2002, the Belarussian government sold its 10.83% stake in Slavneft, the Belarussian-Russian state-owned oil company operating in Russia, to Sibneft (Russia) for $207 million.  Slavneft produced an average of 300,000 bbl/d of crude oil in 2001, a 22% increase over 2000.

Though relatively small, it is increasingly an important sector.  While considered valuable, the Government’s move out of the business is s two-fold signal – while there is a willingness to privatize, there is also the need for much needed foreign currency.

To fuel the growth of the oil industry, it is acknowledged that foreign investment is needed.  However, due to the state of the economy, the Belarusian rouble has plummeted in value on the international currency markets.  Relative to the US dollar at the end of 2003, the rouble is worth 41 times less than in 1998 (see chart below).

Figure 1: US/Belarus Rouble Exchange Rate (Roubles for $1 USD)

While the overall economic situation for the Mozyr Petoleum Refinery has been improving as a result of it transition to a Joint Stock Company, the status of its wastewater discharges could be considered “a work in progress.”  With upgrades and reinvestment, the plant has deployed increasingly environmentally sound technologies in an attempt to bring its production processes in line with competing petroleum producers.  The plant at present operates at a profit.  With staff shareholders, there is a vested interest to ensure that the operation remains profitable. 

With the focus of reducing pollution into the Dnieper River, the primary objective for the MPR is to continue to invest in environmentally sustainable production processes that supports continued profit and production growth. Such processes would likely continue to focus on reducing operating costs, and whose savings could be redirected to improved maintenance and cover the cost of investment.  Given the Plant’s history and investment plan, the commitment to environmentally sound production, its objectives are aligned with those of the Dnieper River SAP.

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¹⁾ – Source: Energy Information Administration, Official Energy Statistics from the U.S. Government, Site: www.eia.doe.gov/cabs/belarus.html

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