Price and quality: a winning combination

By June 20 Ukrnafta’s technical council must sum up the preliminary results of a tender for the development and construction of the Hamaliyivka Gas Refinery and the upgrading of the one in Pasichna. The tender is being held in keeping with a decision passed by the company’s supervisory board in February 2005. The resolution reads in part that the tender procedures must be clear-cut and transparent so as to determine the successful bidder, a company that will be entrusted with developing and executing all pertinent projects.

Nine bids were submitted by domestic and foreign companies. After the qualifying selection the bid evaluation committee (BEC) named five bidders: Frunze NVO of Sumy (Ukraine), Propak Systems Ltd. (Canada), World Energy Services, Inc. (US), Red Mountain Energy Group (US), and Koch Glitsch Schweiz GmbH (US). Last week BEC, in the presence of these companies’ representatives and media people, opened the envelopes with their commercial propositions. Earlier, Ukrnafta’s technical council thoroughly studied the bidders’ technical proposals, which were prepared according to the terms and conditions set out by the Ukrainian Oil and Gas Institute.

The need to hold a tender among these companies is explained by the fact that the gas refineries owned by Ukrnafta have been in use for over 30 years. According to Ukrnafta’s CEO Ihor Palytsia, the degree of wear and tear is quite high, and it has a negative effect on the company’s efficiency and prospects. Experts note that the company’s obsolete gas-refining enterprises fail to meet modern standards and cannot produce tank gas of sufficient quality. Most importantly, they can get only a 12-20% propane-butane and gasoline fraction out of oil gas, whereas modern refineries obtain up to 99 percent.

Thus, experts have found that each year the Kachanivsky gas-refining plant loses over 8.6 million cubic meters of gas, which amounts to 3.6 million hryvnias. Fuel gas losses total 39.6 cubic meters a year, or 16.4 million hryvnias. The yearly expenses in terms of exploitation and repair of pumping and processing installations are close to 13.2 million hryvnias. Ukrnafta’s second-in-command Volodymyr Trotsenko, who is also the BEC secretary, says that under the circumstances, “we have only one task: collect gas, blend it, and transfer it to the gas transportation system, but we also have to observe quality standards.”

The new plant, to be built near the village of Hamaliyivka (Lokhvytsia raion, Poltava oblast), currently the site of the Hlynske-Rozbyshivka gas-refining workshop of the Kachanivsky gas refinery), will process two billion cubic meters of gas (the nominal capacity) from the fields of the Romen and Hlynske-Rozbyshivka groups. According to the production program, in addition to preparing gas for transportation, liquefied gas will also be produced (more than six times the current output, as up to 98 percent of propane and other valuables gases will be extracted from raw gas), along with stable condensate and light fraction to produce high-octane gasoline (A-95 and A-98) and diesel fuel. The new enterprise’s recoupment term is estimated at 3.5 years.

The Pasichna gas-refining enterprise will be located in the village of Pniv (Nadvirna raion, Ivano-Frankivsk oblast). A gas-compressor station (300 million cubic meters a year) and a gas-processing installation (capable of extracting 98% propane and other “higher” gases) will be built here. It will annually produce some 300 million cubic meters of net gas, 14,000 tons of liquefied gas, and 4,000 tons of light fraction. The project’s recoupment term is estimated at 2.6 years.

Ukrnafta’s bid evaluation committee is faced with a task that is anything but simple. The company has to assess both commercial proposals submitted by the bidders and their complex technical decisions. The winner will be named based on the best combination of price and quality.