STABILITY OF OPERATION OF THE FUEL & ENERGY COMPLEX IS A GUARANTEE OF SECURITY FOR A STATE, SAID I. PLACHKOV

About development of the fuel and energy complex in Ukraine and future plans of the industry’s administration, the interview of Ivan Plachkov, the Minister of Fuel & Energy of Ukraine to Caspian Energy.

Caspian Energy (C.E.): Mr. Plachkov, what is a role of the fuel and energy sector in the economy of Ukraine, which branch projects are primary today?

Ivan Plachkov: The fuel and energy complex supplies the country with the electrical and thermal energy, natural gas, coal, all kinds of fuel and raw-stuff for various branches of industry. Therefore, the level of development of the energy sector in the country has a great influence on economy, solution of social problems and living standards of the population. Ukraine has a unique geopolitical and geographical location and is among the world largest exporters of the fuel and energy resources. We have enough resources of coal and components of nuclear fuel, capacities to transport energy products, the developed energy infrastructure and highly professional scientists and personnel.

At that Ukraine is partially provided with its own energy resources, they are imported virtually from one source. The economy of the country has the power-input housing and utility complex and industrial and agrarian production.

I would like to note that after long years of ineffective use of the powerful energy potential of the country, in March 2006 the Ministry of Fuel & Energy of Ukraine with participation of the Common Energy Institute of Ukraine presented a new vision on development of the fuel and energy complex in the country – the Energy Strategy of Ukraine till 2030.

The new project considers the present situation: calculations of GDP growth, fuel and energy balance, and energy saving. The document provides: first of all increasing of reliability and effectiveness of energy saving and effectiveness of energy supply, maximum use of the energy saving potential, calculations on reduction of import and diversification of external and internal sources of energy carriers as well as maximum use of own energy reserves such as coal and uranium. The strategy provides optimization of the fuel and energy balance of the country by means of reduction of natural gas consumption and expansion of the share of renewable energy sources. The new project that will be worked out and introduced in the country concerns creation of the strategic reserve of oil, natural gas and nuclear fuel. Integration of the electrical power sector of Ukraine into the electricity supply network and markets of united Europe will become one of the most important directions of the fuel and energy complex.

C.E.: What is the role of the oil and gas industry according to the energy strategy, in which direction will the oil processing complex of Ukraine develop?

Ivan Plachkov: As for the oil-and-gas sector, we stake on growth of oil to be produced by the Ukrainian companies abroad as well as increasing of energy resources production inside the country. It is possible to provide the growth of gas production at the territory of Ukraine up to 28,5 billion m3 in 2030 due to significant reduction of gas consumption.

The strategy provides reduction of oil import to meet the needs of Ukraine; however, it does not mean that somebody will not have place at the market. Our target is just to provide the country with the own resource as much as possible. The Ukrainian petroleum refineries working on the Russian oil of the parent companies will have opportunity to export their production or compete at the home market.

Growth of oil transportation volumes requires starting stepwise implementation of the projects on integration of Druzhba and Adriya oil pipelines, construction of the Brody-Plotsk oil pipeline, and implementation of the Eurasian Oil Transportation Corridor project to provide transportation of oil from the countries of the Caspian region.

One of the primary tasks of the oil-and-gas complex is to reconstruct and upgrade petroleum refineries and bring the depth of procession to 95%, which will stimulate the economic effect of imported and domestic oil as well as creation of the strategic reserve of oil products.

C.E.: Which countries will become the primary partners of Ukraine in future?

Ivan Plachkov: As I have already said, first of all Ukraine should use its own energy potential, geographical location and well-established international relations to strengthen the energy security and reach economic results.

Besides, the existing potential in the power economy of Ukraine gives opportunity to cooperate will all CIS countries and whole Europe. Ukraine has a developed network of the oil-and-gas systems, powerful interstate power transmission lines due to which we take part in elaboration of the energy policy of both East and West.

The events that took place during the passed winter season against the background of relations with Russia and European countries on matters related to transit and gas supply once more confirm necessity to work out forecasted directions of cooperation in the given branch with the gas supplying countries and EU consumer countries.

C.E.: What projects will become a ground of the Eurasian Transportation Corridor? Which countries do you plan to involve?

Ivan Plachkov: The project of the Eurasian Oil Transportation Corridor (EOTC) covers interests of Azerbaijan, Kazakhstan, Russia, Georgia, Ukraine, the Baltic countries and EU. The project of Odessa-Brody Oil Pipeline is a key component of EOTC and provides the following routes: Western – Odessa-Brody with the outlet to the Druzhba system (Slovakia, Czechia, Austria and South Germany); Northwest – Odessa-Brody-Plotsk-Gdansk with further construction to Wilhelmshaven port; North – Odessa-Brody with further construction to Byelorussia and the Baltic region. Besides, EOTC provides development of such perspective projects as Tengiz-Kropotkin-Tikhoretsk-Lisichansk-Kremenchug-Brody and Kirkuk-Ceyhan-Samsun.

C.E.: What are the nearest outlooks of development of the Odessa-Brody Oil Pipeline, whether it will be expanded to Polish Gdansk?

Ivan Plachkov: The pipeline from Plotsk to Gdansk already exists and operates in two directions in compliance with the requirements of the market. The reserves of its capacity allow receiving additional volumes from the Brody-Plotsk Oil Pipeline.

In line with the frame business plan of the Brody-Plotsk project worked out by the International Consortium, the project is competitive and cost-effective. The project is expected to yield profits already during the first year of exploitation. To date the route of the pipeline has been already defined and provides using of 70 km of the already existing Druzhba pipeline, which belongs to our Polish colleagues – PERN Pshiyazn. Owing to this we shall manage to reduce the cost of the Polish section by approximately 100 million USD.

We hope that the pipeline will be started up in 2009. Today we prepare for launching of the Odessa-Brody pipeline’s operation in the European direction through other routes of Southern Druzhba (Slovakia, Czechia, Germany, Austria, and Hungary).

It is very important that EU systematically supports the given project. In compliance with the new energy strategy of EU (Green Paper), the project is included in the number of priority ones.

the opinion:

Natig Aliyev, the Minister of Industry & Energy of Azerbaijan:

"Azerbaijan is ready to create a transit corridor for countries that want to take part in the project on oil transportation through the Ukrainian Odessa-Brody Oil Pipeline. For instance, if Kazakhstan or Turkmenistan will want to transport their oil through the Odessa-Brody route guiding by some interests, we will create all conditions."

According to the Minister, functioning of the Odessa-Brody Oil Pipeline project should be implemented on the economical rather than the political ground.