Our main purpose is to create guarantees and attractive conditions for private business
Pipeline transportation is a mechanism of cooperation between producer, transporter and oil consumer. It's often used as a mechanism for creation independence, considering international scales of pipeline systems. J. Rockefeller stated, "those who control oil transportation, they control both the extraction and refining". Today we'll interview a person who knows more about perspectives, safety and shorter route of oil transportion to Europe. Our guest is Alexander Todiychuk, - Special Representative of Ukraine on Euro-Asian oil transport corridor - President of JSC "Ukrtransnafta" C.E. Alexander Sergeyevich, today several perspective routes of Caspian oil transportation to Central and Eastern European markets are being considered, however experts state that the only ready to work variant of route from Asia to Europe is proposed by Ukraine. At what development stage is now project Odessa-Brody?
A. T. Positive attitude towards the project in some Western countries and European Commission formed by the parties of EAOTC project, is very important for us. Project Odessa-Brody is already recognized by European Commission as first by-pass round Bosporus. The project is included to the official document of European Commission, the so-called Message on development of energy policy of the extended European Union, its neighbors and partner countries. One of its priorities is considered cooperation with neighboring countries for ensuring security of marine oil transportation, including expansion of pipeline Odessa-Brody till Plock with further joining it either with Northern line of "Druzhba", or with existing pipeline running to Polish Baltic port Gdansk. In May of this year industrial conference "Project of oil transportation Odessa- Brody -Plock: enhancing security and integrity of European Union in energy sphere" was held in Brussels under the aegis of European Commission. During the conference All-European importance of the project was recognized unanimously. Vice-President of EC Loyola de Palacio stated that European Commission considered project Odessa-Brody- Plock to be strategic.
Vice-President of European Commission Loyola de Palacio "Odessa-Brody is a project of Pan-European interests. It provides an opportunity to transport oil through ecologically clean route and will discharge Bosporus"
Recently Prime Ministers of Ukraine, Poland, Slovakia, Czech Republic received letter on the behalf of European Union, in which European Union government addresses a request to pay more attention to this pipeline, to support it as priority in energy strategy of European Union. USA's position concerning project development also remains unchanged - we feel their constant support. During small period of company existence we were provided with 4 TDA grants by US for economic research, which also increases efficiency of joint cooperation. We have developed serious base of bilateral economic and political agreements with some European countries, and first of all, we are happy with constructive position of Poland. Program of EAOTC project development stipulates three stages: first - trans-shipment of oil from "pipes" "Pridneprovsk main pipelines" to marine tankers in port "Yuzhniy" in addition to those volumes which are shipped in Odessa at present (11-12 mln. t annually). In other words, without additional investments, using units of new system (terminal "Pivdenniy" and 52 km part of pipeline Odessa-Brody) we ship to tankers - 100,000 to 4 mln t. oil annually in addition to the volumes, shipped in Odessa. This stage is already being realized. I would like to emphasize, that considering market requirements and our client's demands, we can ship through "Pivdenniy" up to 15 mln t. oil annually in the basis of long-term contracts. Besides, we plan to create railroad terminal, also reversing, located near technological site of marine terminal, which will enable additional shipment of non-standard, heavy oil and mazut from railroad through marine terminal in tankers -3-3.5 t. We call all these short-term perspective, the realization of which has already started. Mid-term perspective is continuation of filling pipeline with process oil and transportation of high-gravity Caspian oil till Brody, and further through existing pipeline system to Slovakia, Czech Republic, Germany and together with Russian oil to port of Omishal (Croatia) after realization the Druzhba-Adria project . At present we work on realization of the said stage. Using potentials of Europe's existing oil transportation system we can supply Caspian oil simultaneously with Russian oil to some oil refineries, replacing volumes of high-gravity oil grades, which, according to expert forecasts, in a few years will be lost due to decreased oil production in the North sea, and also as a result of depletion of high-gravity oil reserves in Carpathian region, etc. As a long-term perspective - extension of pipeline till Plock: 100 km on Ukrainian and 400 km on Polish territory with perspective of oil supply to oil refineries and terminals in Poland and Germany. Project developer company "PriceWaterhouseCoopers" has already developed business-plan conception and supports successful realization of mid- and long-term stages.
C.E. What is the expediency of EAOTC project based upon? A.T. Economic researches of several well-known companies, such as "Gulf interstate", "Halliburton Kellogg Brown&Root" "Cambridge Energy Research Associates CERA" proved economical perspectives and expediency of project development. Though we are not insured from a whole series of risks, which must be prevented by competent management of project development processes. "Researches of English institute "Randal" proved that due to its geographical location Ukraine possessed the highest coefficient of transitness. Many countries accept Ukraine as more favorable partner in realization of projects in the frames of Great Silk Road, with which project EAOTC (has chances) will be harmonically blended".
C.E.: - Who of the potential oil suppliers are you conducting negotiations and on what supply volumes?
A. T.: - At present " Ukrtransnafta " in cooperation with company "PriceWaterhouseCoopers" has developed business-plan conception of Euro-Asian oil transportation corridor project and started forming stock of orders for pipeline use. In the network of this stage we plan to conduct negotiations with companies- oil reserves owners, and with oil consumers regarding their participation in the project. At present coordination of requirements and potentials are being implemented. As far back as in May of this year during Brussels conference representative of Azerbaijan republic Oil Company (SOCAR) stated that the company produces annually 16 mln. t oil, and its transportation through Ukrainian pipeline is "top-priority" for his country. We conduct negotiations with Kazakh state company "KazMunayGaz", Chevron Texaco. In July of this year protocol of joint Ukrainian-Kazakh Intergovernmental commission's meeting was signed. The protocol reflects Kazakh party's willingness to participate in the project. On the initial stage readiness to supply 8 mln t oil annually was expressed. Negotiations with ExxonMobil, Conoco Philips which possess not only oil resources but also share holdings in some European oil refineries, are being implemented.
C.E: How attractive will the tariff policy be for our clients?
A. T.: Our main task is to meet requirements of clients to the maximum: Azerbaijanian, Kazakh, Russian companies. At the same time we develop our own business, expand range of provided services. Our company is interested in stable oil supplies for Odessa-Brody. Therefore, we provide long-term and guaranteed access to the pipeline, ensure competitively stable tariffs for transportation, trans-shipment and filling of Caspian oil to the main pipeline system of Ukraine. Ukrainian government works in accordance of the market demands with Caspian region supply. In 2003 preferences are applied on rent payment for oil transportation through Ukrainian part of EAOTC. For Odessa-Brody for a while we have accepted $0.64 as a base tariff, and $3.5 for trans-shipment of oil in port "Pivdenniy". But we would like to reduce tariff for trans-shipment in the port to $2.5, if the terminal will be well loaded.
C.E: For comparison: are these tariffs compatible with other, Russian or Western ones?
A.T.: Yes. These are tariffs of our region and represent good proposal for our clients, as they were recognized by six countries- participants of the project "Druzhba-Adria". Tariff $0.64 is recognized as optimal. Though further in the West tariffs are higher. For example, in Hungary and Slovakia tariff is a dollar and more. Ukrainian tariffs are "golden mean". Calculations indicate that Odessa-Brody becomes competitive in comparison with other routes; we represent interest for all project participants.
C.E: - How will the issue of Caspian oil delivery to terminal "Yuzhniy" via sea be settled? What terminals in general will be used?
A.T.: - Among terminals we can indicate Supsa, Novorossisk and also Tuapse, where high-gravity Siberian oil is shipped. We think use of vessels with capacity up to 100 thousand t will be more effective. Both we, and countries interested in getting Caspian oil can freight the tankers. Ukraine itself also can build oil carriers on its shipyards. We had negotiations with management of Nikolayevsk and Kerchensk shipbuilding yards - they have all necessary projects and licenses and they confirmed readiness to build such tankers. But marine route of oil supply is not the only one. We also conduct negotiations with Kazakh and Russian colleagues on main construction, which could join the system of Caspian pipeline consortium with Pridneprovsk main pipelines. It could help to reduce the price of expensive trans-shipment and to save not less than $5 per oil ton, and even improve ecological situation in the Black Sea.
C.E: Who are your potential oil consumers? According to BBC service, referring to Vice Prime Minister of Ukraine Vitaliy Gayduk, first stage of Odessa-Brody can function even today. Please tell about it. A.T. The said project represents interest, as it has perspective of extension. In 2-3 years we intend to ship from 6 to 11 mln t oil annually for Westerukrainian, Slovak, Czech, South-Polish refineries. The next stage will be Brody-Plock, which will enable to ship additional 10 mln t oil. In Polish direction there is a perspective to increase trans-shipment up to 25 mln t oil annually, considering Northern German refineries with capacity to ship oil in German port Willgelmshafen. Concerning real consumers, today we have a range of agreements with European refineries. Being guided by results of its own market potentials research considering activation of EU interests towards the project Odessa-Brody-Plock, representative of the refinery Czeska rafinerska in Brussels stated that they can sell app 10-12 mln.t oil products annually. According to him, the enterprise itself is ready to order 2 mln t annually. Protocol with Polish "Group "LOTOS" which consolidates 4 Polish oil refineries, was signed. In the protocol Polish party confirms its intention to purchase high-gravity low-sulphur oil at the volume up to 3 mln t annually. At the end of July we signed protocol with Polish AT PKN "ORLEN" which declared its readiness to accept up to 4 mln oil. Besides, "ORLEN" officially confirmed its interest in extension of pipeline Odessa-Brody till Plock, as it provided potential to creation of additional direction for low-sulphur oil supply for the needs of Concern.
C.E: - Alexander Sergeyevich, do you think Ukraine can launch Caspian oil through the route Odessa-Brody in the stipulated time?
A.T.: It depends not only from "Ukrtransnafta". If the government will act decisively, it has good chances for it. But if we will be uncertain, it will cause doubts in our potential partners, then of course, nothing will work. And Ukraine will lose. Today I don't know any other more effective project directed at integration to the Western World, to Europe. I don't know any other Ukrainian project the European Union takes so much interest in. And its successful realization means not only money for oil to Ukrainian budget, but also increased trust to Ukraine as a subject of world economic relations, formation of positive business precedent, which can serve as a ground for realization of other large-scale joint projects, and not only oil projects.
"Our main purpose is to create guarantees and attractive conditions for private business. In this plan already many things have been done and in the network of government conception determining legal and ta? basis of project in Ukraine. Now we have to harmonize it with conditions acceptable for private business".
A. Todiychuk
Multilateral meetings and constructive negotiations in the network of international conferences and "round tables" open our project for new potential participants of project realization and expand perspectives for further progress of EAOTC on the way to integration to European economy. Our advantages are reliability, security of oil transportation routes, opportunity to deliver oil to perspective markets, maintaining its quality and transparency in business. Ukraine would like to create positive precedent on EAOTC sample in realization of large-scale international projects, the experience of which we can adapt in other major projects in our territory.