15.07.03

Extending Odessa-Brody pipeline to Gdansk

It is senseless to extend the Odessa- Brody pipeline to Gdansk, as there will not be any demand for Caspian oil in that region, due to its high price, compared with Russian oil and oil from the North Sea, Matthew J. Sagers, from the Cambridge Energy Research Association, who is involved in an interdepartmental working group on the use of the Odessa-Brody pipeline, told journalists in Kyiv on Wednesday.

He said that neither Hungary nor Poland are showing any interest in light oil from the Caspian region and demand for this oil further to the west - in Southern Germany is not very likely due to its low competitiveness compared with oil from the Mediterranean, which complicates the transit of oil through the Odessa-Brody pipeline to the north.

Sagers said that only the Czech Republic has announced its readiness to take 2 million tonnes of Caspian oil from the pipeline, however, this volume is insufficient for the pipeline to be profitable.

He also said that the transportation of an additional 9 million tonnes of Russia oil through the pipeline in reverse and through the Bosporus Straits would not cause any additional difficulties.

"The decision of the Ukrainian side [on which direction to use the pipeline] will not affect the Bosporus," he said.

He noted that a year ago he already recommended to Ukrtransnafta to use the Odessa-Brody pipeline, unused capacity of the Pridneprovsky trunk pipelines and the Yuzhny oil terminal to transport Russian oil. He said that the appearance of a company ready to supply technical oil for this project makes it more than attractive.

At the same time Sagers noted that in addition to economic considerations, the choice of route also has geopolitical implications.

"This is a very difficult decision and I am glad that it is not I, but the Ukrainian government, that will have to reach it," he stressed.

As reported earlier, the project to extend the Odessa-Brody pipeline to Plotsk has received political support from the Ukrainian and Polish governments and from the European Commission; and commercial support - in the form of a business plan confirming sales markets for oil that will be transported via the pipeline to Europe.

However, it is also possible to use the pipeline in reverse, from Brody to Odessa. In particular, at the start of July a number of Russian oil companies appealed to Russian Prime Minister Mikhail Kasyanov and Ukrainian Prime Minister Victor Yanukovych with a request for support the reverse use of the Odessa-Brody pipeline to transport 9 million tonnes of oil per annum. The letter was signed by Transneft President Semyon Vainshtok, Rosneft President Sergei Bogdanchikov, Tyumen Oil Company Executive Director German Khan, Yukos CEO Mikhail Khodorkovsky, Sibneft President Yevgeny Shvidler and Slavneft President Yuri Sukhanov.

Ukrainian President Leonid Kuchma announced on June 24 that Ukraine will not use the Odessa-Brody pipeline in reverse if the European Commission takes concrete steps for the direct use of the pipeline. "There will be no reverse if the we have concrete steps from the European Commission, and not just declarations, for the pipeline to operate," he said.

As reported earlier, the companies Naftohaz Ukrayiny, Ukrtransnafta and Russia's Tyumen Oil Company and Transneft signed a protocol of intent in Moscow on April 23 to organize a new export route for Russian oil through Ukraine, using the Odessa-Brody pipeline in reverse to export an additional 9 million tonnes of oil per annum. Ukrtransnafta in January-May 2003 already transported 9 tankers of oil from the Yuzhny terminal with 767,000 tonnes of oil and paid 40 million hryvna to the Ukrainian budget from the use of the terminal and the 52-km Odessa-Brody pipeline.

The first phase of the pipeline was launched in May 2002. It has a capacity of 9 million - 14.5 million tonnes of oil per annum and a reservoir capacity of 200,000 cubic meters. The Yuzhny terminal is capable of handling tankers with deadweight of up to 100,000 tonnes. It is planned to expand the capacity of the pipeline to 40 million - 45 million tonnes per annum and to increase the reservoir capacity to 600,000 cubic meters.

(Interfax)