TODAY.AZ / Business

Ukrtransnafta moved closer to reversing Odessa-Brody route to receive Caspian oil

27 July 2006 [02:37] - TODAY.AZ
Ukraine's state-owned oil pipeline company, Ukrtransnafta, has paid back a $108 million loan to the Russian-British joint venture TNK-BP ahead of schedule, freeing it of its obligations to transport Russian crude through the geopolitically sensitive Odessa-Brody pipeline in reverse mode and renewing Western hopes of getting Caspian oil to Europe around Russia.

The company announced that on July 19 it paid back the loan partly from revenues generated by its own operations and partly from a $120 million loan received earlier this month from international investment bank Merrill Lynch.

"From the moment that Ukrtransnafta paid back its debt to the company [TNK-BP], it took back the right to use the Odessa-Brody pipeline on its own," Ukrtransnafta CEO Oleksandr Todiychuk was quoted as saying by the company's press service.

The Odessa-Brody pipeline had been at the center of a geopolitical tug of war starting in 2001 between Ukraine, which wanted to use the pipeline to transport Caspian oil north to diversify supplies from Ukraine to Europe, and Russian oil interests, which pushed for the transit of Siberian crude in the opposite direction for export to Western markets from Odessa.

In 2004, the Russian interests prevailed, with the Ukrainian government under then Prime Minister Viktor Yanukovych approving the use of Odessa-Brody in reverse mode, and Ukrtransnafta taking a $108 million, three-year loan from Skilton, a member of TNK-BP, to buy 425,000 tons of technological oil from the Russian-British joint venture and pump it northward through the hitherto unused Odessa-Brody pipeline.

The agreement between Ukrtransnafta and TNK-BP also provided for the transport of up to 9 million tons of Russian crude a year via the pipeline. To date, however, the pipeline has transited a total of only 8.6 million tons of Russian oil in the last two years, ostensibly because Russian oil suppliers have calculated that the transit of their oil through the pipeline would be unprofitable.

But TNK-BP has recently said it plans to pump a total of 6 million tons of oil southward through the Odessa-Brody pipeline this year, Ukrainian News information agency reported.

For its part, Ukrtransnafta has announced plans to begin pumping oil toward Brody in 2007.

TNK-BP has argued that while Ukrtransnafta has the right to pay back the loan to TNK-BP ahead of schedule, it cannot renege on its contractual obligations to transport Russian oil through Odessa-Brody in the direction of Odessa, which, TNK-BP has said, continue to remain in force.

Critics of Ukrtransnafta's possible plans to operate Odessa-Brody in the direction of Brody have noted a deficiency of Caspian oil to transport through the pipeline and the fact that the pipeline ends in Brody without being integrated with other oil transport systems.

Ukrtransnafta Deputy CEO Mikhail Gonchar said in May that Ukraine and Poland were working out a framework project to complete Odessa-Brody to the Polish city of Plotsk.

Ukraine has said that it wants to lengthen the pipeline to Plotsk, since the sprawling, 5,200-kilometer Druzhba pipeline which provides Russian oil to Central and Eastern Europe, and a large part of the former Soviet Union, including Ukraine, Belarus, Russia and the Baltic States passes from Plotsk to the Baltic Sea port city of Gdansk, in Poland.

In addition to the deficit of Caspian oil for the Odessa-Brody pipeline, and the pipeline's lack of connection to other oil transport systems, industry experts say that the Baku-Tbilisi-Ceyhan (BTC) pipeline will draw substantial volumes of Caspian oil away from the Odessa-Brody pipeline.

Launched in mid-July, BTC is expected to pump more than 50 million tons of Caspian oil a year to the Turkish port of Ceyhan on the Mediterranean Sea for further export by tankers to Western markets. The Odessa-Brody oil pipeline was completed in 2001 but remained unused until 2004.



Print version

Views: 2228

Connect with us. Get latest news and updates.

Recommend news to friend

  • Your name:
  • Your e-mail:
  • Friend's name:
  • Friend's e-mail: