American prospects for Ukraine’ s oil corridor
To all appearances, the results of the January 30-31 Kyiv meeting of the coordinating group of signatories of the Agreement on Cooperation in the Project to Connect Druzhba and Adriya oil pipelines look somewhat confusing. The coordinating group set up yet another working group to implement the project. This new group will meet five times during the year, with the first meeting in two weeks in Budapest, Hungary.
Yet there is nothing to laugh about. Mapping the route of oil flows to cross six countries with different oil transit tariffs is not easy. However, the meeting quickly resolved this arguably most difficult issue. Ukraine, Russia, Belarus, Slovakia, Hungary, and Croatia joined the Druzhba-Adriya project in April 2001. Under that agreement, the through tariff for pumping oil as part of the project will be $0.64 per 100 kilometers. The only project operator during the first phase of the project when the first five million tons will be pumped is the Russian Trans Oil company. Russian companies will be able to export five million tons of oil annually. Oil will flow through the countries which signed the agreement all the way to the Croatian deep-sea port of Omishal. The project’s major clients, Tiumen Oil Company and YUKOS have provided oil transit guarantees. With these agreements in place, Ukrtransnafta chief Oleksandr Todiychuk hopes that the first tanker will leave the port in Croatia as soon as December of this year. The U.S. has approved the project which involves supertankers delivering oil from Croatia to the rest of Europe and America. Ukraine’s special interest in oil shipments to the Adriatic Sea, revolves around the idea that the Druzhba project can affect the Odesa- Brody pipeline, of which a mere 52-kilometer stretch is in use. The line was built without a proper business plan, but Price Waterhouse Coopers Company is developing one now. Odesa-Brody is standing idle, since all Ukrainian oil refineries have been bought by Russian companies and, as a result, they do not need Caspian oil. Currently, the Ukrainian pipeline is seeking a passage to Europe. Talks with Poland on its possible participation in the project have political support, but the corresponding intergovernmental agreement has not been signed. Moreover, it may be replaced with a mere declaration of intentions.
It is not ruled out, though, that the Druzhba-Adriya project may prove an incentive for the Poles, who have received the corresponding draft agreement, to make a decision. After all, the new project, an almost completed bypass route around the Bosporus, is taking a more real shape with each passing day. In part, the Ukrainian side surprised the working group members with a report on the completion of a new reliable thirty-kilometer-long stretch of the Druzhba pipeline in the Carpathians. However, Ukrainians could prove wrong if they believe that Russian oil companies will turn a blind eye to their Caspian competitors’ invasion of their markets and even more so of the US market. Answering The Day ’s question, Oleksandr Horodetsky, president of the TNK-Ukraine company, said that he viewed “this project with a good deal of criticism. The matter is that the Caspian Pipeline Consortium is being launched, and Caspian oil is more oriented toward it rather than the Odesa-Brody pipeline aiming in the direction of Adriya. In my view, Caspian oil will not go that way. Russian oil is a different matter. The possibility of using the Odesa-Brody pipeline for transporting Russian oil should be given due consideration. The other day TNK sent the first tanker to the Pivdenny port and is ready to continue working in this direction.”
From the outset, Russian companies did not show much interest, but the recent Kyiv talks “have considerably livened up the atmosphere around this project.”
