By Yuri Glushkov exclusively for Vestnik Kavkaza
Baku hosted an informal meeting of the energy ministers of the Eastern Partnership. For the first time since the start of the crisis, Ukrainian Minister for Energy and Coal Industry Yuriy Prodan visited Baku. He is very familiar with the city, being the minister when Yulia Tymoshenko was the prime minister.
Prodan expressed hope for Azerbaijani oil shipments to Ukrainian refineries. Azerbaijan agreed to help after discussing details. The civil war in Ukraine has been disastrous for the economy. Shelled Donbass has 70% of all Ukrainian coal mines. The country, mining over 85 million tons of coal every year, plans to buy it in South Africa.
Ukraine needs around 20 million tons of oil and petroleum, only 15-20% of the demand is fulfilled. Only two out of six refineries in Ukraine are operating. For the last decades, the government has not made much effort to keep the petroleum sector operating. It prefers to buy petroleum from Belarus, Lithuania, Poland and Russia.
In the current mess and constant default risk, few would want to invest even in such a promising sector as oil refineries or even organize shipments of energy resources. Nonetheless, Ukrainian Minister for Energy and Coal Industry Yuriy Prodan discussed prospects of the Odessa-Brody pipeline and hinted at the need to build a section from the Polish border, the Brody-Plock section needed for the Eurasian Oil Transport Corridor.
Ten years ago the Sarmatia International Pipeline Enterprise was formed for realization of the project. The State Oil Company of the Azerbaijan Republic (SOCAR), the Georgian Oil and Gas Corporation (GOGC), Ukraine’ Ukrtransnafta, Poland’s Przedsiebiorstwo Eksploatacji Rurociagow Naftowych Przyjazn S.A., each having a share of 24.75% and Lithuania’s AB Klaipedos Nafta with a share of 1% joined the enterprise.,
In August, Ukraine disbanded the consultation group for formation of new routes for energy transport from Azerbaijan, through Ukraine, denying any relation between that decision and the change of the country’s policy in energy cooperation.
Millions of dollars have been spent on the pipeline from Odessa to Brody (9 million ton capacity), but it has never been made use of. It has become a symbol of economic improvidence and flaws in the energy policy of Ukraine in the mid 2000s. The pipeline started paying off only when it started pumping Russian oil to Odessa.
In current conditions, hoping for shipments of Azerbaijani oil to Ukraine is as naïve as 10 years ago. The main argument of the Azerbaijani side is that if Ukraine wants to buy Azerbaijani oil for its own consumption, it should be done at the Black Sea terminals of Supse (Georgia) and Novorossiysk (Russia).
Oil shipments to Ukraine or transit through its territory is of no commercial interest for Azerbaijan. In the first case, Kiev will need to provide a clear picture of how it will pay for the energy resources. In the current situation, when Ukraine is financed by the International Monetary Fund and loans of Western states, there is no visible clarity in Ukraine’s solvency.
In the second case, lack of any economic gains from transit of oil through Ukraine is obvious. Azerbaijan has diversified its energy route through Georgia, Turkey and Russia. Sending Azerbaijani oil to Ukrainian ports will need two trans-shipments, making logistics and the product itself too expensive.
In the 2000s,SOCAR tried to buy a refinery in Ukraine, guaranteeing oil shipments to the enterprise. It was a failure, local oligarchs had everything in their hands. It did not stop the company from creating a wide network of petroleum stations, bunkering ships on Dnieper. SOCAR imports Euro-5 fuel from Poland, Lithuania and Belarus. SOCAR invested $170 million in Ukraine 2009-2013. This includes social and charity initiatives.
In the current conditions, the proposals of the Ukrainian side are hardly likely to impress Baku, where the authorities have a good understanding of all the details of cooperation with Kiev. The Ukrainian economy will have to wait for better times if it wants mass expansion of Azerbaijani capital and shipments of Caspian oil.
The river of Azerbaijani oil will not make it to UkraineBy Yuri Glushkov exclusively for Vestnik KavkazaBaku hosted an informal meeting of the energy ministers of the Eastern Partnership. For the first time since the start of the crisis, Ukrainian Minister for Energy and Coal Industry Yuriy Prodan visited Baku. He is very familiar with the city, being the minister when Yulia Tymoshenko was the prime minister.Prodan expressed hope for Azerbaijani oil shipments to Ukrainian refineries. Azerbaijan agreed to help after discussing details. The civil war in Ukraine has been disastrous for the economy. Shelled Donbass has 70% of all Ukrainian coal mines. The country, mining over 85 million tons of coal every year, plans to buy it in South Africa.Ukraine needs around 20 million tons of oil and petroleum, only 15-20% of the demand is fulfilled. Only two out of six refineries in Ukraine are operating. For the last decades, the government has not made much effort to keep the petroleum sector operating. It prefers to buy petroleum from Belarus, Lithuania, Poland and Russia.In the current mess and constant default risk, few would want to invest even in such a promising sector as oil refineries or even organize shipments of energy resources. Nonetheless, Ukrainian Minister for Energy and Coal Industry Yuriy Prodan discussed prospects of the Odessa-Brody pipeline and hinted at the need to build a section from the Polish border, the Brody-Plock section needed for the Eurasian Oil Transport Corridor.Ten years ago the Sarmatia International Pipeline Enterprise was formed for realization of the project. The State Oil Company of the Azerbaijan Republic (SOCAR), the Georgian Oil and Gas Corporation (GOGC), Ukraine’ Ukrtransnafta, Poland’s Przedsiebiorstwo Eksploatacji Rurociagow Naftowych Przyjazn S.A., each having a share of 24.75% and Lithuania’s AB Klaipedos Nafta with a share of 1% joined the enterprise.,In August, Ukraine disbanded the consultation group for formation of new routes for energy transport from Azerbaijan, through Ukraine, denying any relation between that decision and the change of the country’s policy in energy cooperation.Millions of dollars have been spent on the pipeline from Odessa to Brody (9 million ton capacity), but it has never been made use of. It has become a symbol of economic improvidence and flaws in the energy policy of Ukraine in the mid 2000s. The pipeline started paying off only when it started pumping Russian oil to Odessa.In current conditions, hoping for shipments of Azerbaijani oil to Ukraine is as naïve as 10 years ago. The main argument of the Azerbaijani side is that if Ukraine wants to buy Azerbaijani oil for its own consumption, it should be done at the Black Sea terminals of Supse (Georgia) and Novorossiysk (Russia).Oil shipments to Ukraine or transit through its territory is of no commercial interest for Azerbaijan. In the first case, Kiev will need to provide a clear picture of how it will pay for the energy resources. In the current situation, when Ukraine is financed by the International Monetary Fund and loans of Western states, there is no visible clarity in Ukraine’s solvency.In the second case, lack of any economic gains from transit of oil through Ukraine is obvious. Azerbaijan has diversified its energy route through Georgia, Turkey and Russia. Sending Azerbaijani oil to Ukrainian ports will need two trans-shipments, making logistics and the product itself too expensive.In the 2000s,SOCAR tried to buy a refinery in Ukraine, guaranteeing oil shipments to the enterprise. It was a failure, local oligarchs had everything in their hands. It did not stop the company from creating a wide network of petroleum stations, bunkering ships on Dnieper. SOCAR imports Euro-5 fuel from Poland, Lithuania and Belarus. SOCAR invested $170 million in Ukraine 2009-2013. This includes social and charity initiatives.In the current conditions, the proposals of the Ukrainian side are hardly likely to impress Baku, where the authorities have a good understanding of all the details of cooperation with Kiev. The Ukrainian economy will have to wait for better times if it wants mass expansion of Azerbaijani capital and shipments of Caspian
