Media outlook in August 2005

According to a number of the regional mass-media on August 26 during his official visit to Lugansk the Minister of Education and Science Stanislav Nikolayenko stated that “the managers of LINOS should be dispossessed and brought to beggary”, since they could provide computers to the schoolchildren of Lisichansk. While putting aside the rhetoric of the dreadful times of collectivization which was hardly appropriate in any civilized state, one could notice that awareness of the Minister Stanislav Nikolayenko in issues of functioning of the oil refineries is extremely desultory. In 2004 the plant paid UAH 500 000 for charitable purposes. Of that amount UAH 135 000  were spent for the needs of the educational institutions of Lugansk. In the current year this amount made already UAH 36 566. All in all from beginning of the year the plant granted aid for the total of UAH 245 000”, - said V. Kikhtenko, the Head of the Public Relations Department of LLC “LINOS”

The Odessa, Drohobych and Kherson Oil Refineries which were shutdown for capital repair works were recently joined by the major producer of the oil products in Ukraine — LINOS. However, in Lisichansk only one piece of equipment should be repaired: a lightning from a storm has struck a high-voltage transmission line on Tuesday and ravaged a compressor and a catalytic reforming unit. Falling out of the reforming from a technological scheme has immediately disabled the production of gasoline А-95.

For the third time in August the oil price at the New York Stock Exchange has reached historical maximum – $65 per barrel. It cannot be ruled out that the latest events would affect the domestic oil products market. The First Vice-Prime Minister of Ukraine Anatoly Kinakh stated, that in August the fuel prices at the fuel stations could increase by 10% (UAH 0.30–0.35), however he assured that there would be no gasoline shortage. According to the First Vice-Prime Minister the Government plans to import about 200 000 tons of gasoline and diesel fuel into Ukraine.

The First Vice Prime-Minister Anatoly Kinakh states that 200 000 tons of ready-made oil products will be imported into Ukraine to stabilize the price situation at the internal market in August. Anatoly Kinakh underlined once again that the Government did not predict a shortage at the oil products market in August-September. According to him during the meeting of the working group the representatives of the oil companies Open Joint Stock Company "LUKOIL" and TNK-ВР "have undertaken protocol obligations" to saturate the market with the oil products.

At the session of the Agriculture Department of the Lugansk State Administration it was announced that the region had harvested already 1 mln tons of grain and thus had fulfilled the regional program "Grain-2005", having provided the food safety of the region.

On August 4, the Cabinet issued a decree on creation of a working group on the oil and oil products market and development of the oil industry. The working group was headed by the First Vice-Prime Minister Anatoly Kinakh. Apart from the representatives from the Government, the working group was as well joined by the representatives from the top management of the companies "Ukrtatnafta", "Naftogaz Ukraine", TNK-BP Ukraine, "LUKOIL-Ukraine", "Oil Company "Alliance-Ukraine", "Ukrneft", "Ukrtransneft".

For 13 years of independence in Ukraine the oil processing in the country has dropped down by three times: from 58 mln tons a year to 21 mln tons a year.

Record heat wave did not stop the organizers of the Ukrainian championship from holding the ring car racing. Although the asphalt was almost at the melting point, the tires of the cars wore out extremely quickly and the engines were boiling, the third and the fourth stages of “TNK Cup” did take place.

In the first six months of 2005 the Lisichansk Oil Refinery has manufactured about 55 000 tons of road bitumen. Having resumed the production of this product in March, the plant has as well mastered the production of the roofing bitumen of two grades – BNK 45/190 and BNK 40/180 in compliance with the State Standards of Ukraine 4044-2001.

The First Vice Prime-Minister of Ukraine Anatoly Kinakh states, that today no ready projects of the Eurasian Oil Transportation route and its development strategy exist. "There are no ready strategies and projects of the Eurasian Oil Transportation route existing today", - said Anatoly Kinakh.

The First Vice Prime-Minister of Ukraine Anatoly Kinakh predicts, that the Odessa-Brody Oil Pipeline will start working in the direct mode not earlier than 2007.

According to operative information the oil supplies to the Ukrainian oil refineries in July have dropped down by 34,2% as compared to the same period of the last year – up to 1 mln 514 300 tons.

The Minister of Economy of Ukraine Sergey Teryokhin believes: the retail prices for the oil products in Ukraine will keep slowly growing following the growth of the world prices for the Russian oil of Urals grade.

The third round of the Ukrainian Championship in circle cup car racing "TNK Cup" took place in Kiev. The Trading House TNK-Ukraine has sponsored the Ukrainian Championship in circle cup car racing.

The Lisichansk Oil Refinery plans to increase in 2006 the production of bitumen by 33% - up to 200 000 tons, informed the Public Relations Department of LLC TNK-BP Ukraine.

On the background of reduction of the investment appeal of the Ukrainian enterprises the oil processing industry looks like rara avis. Out of six Ukrainian oil refineries, which were sold during the years of independence, five have fulfilled their investment obligations.  They paid off the debts to the State, upgraded the equipment of the plants.

The Ukrainian Government does not intend to regulate the price policy at the oil products market using administrative methods. Such statement was made by the First Vice-Prime-Minister Anatoly Kinakh.

Last week "LUKOIL" announced a major reconstruction of the Odessa Oil Refinery. A week earlier TNK-BP announced about its intention to invest $150 mln in development of the Lisichansk Oil Refinery (LINOS). The Vice-President in charge of downstream operations Anthony Considine noted that by 2010 the company intended to invest $150 mln in development of the enterprise.

Having paid off on July 15 the remaining debts to the bank West LB for the total of €52,3 mln and thus having pleased the State Treasury by the unprecedented one-time payment, the company TNK-ВР has completed the fulfillment of the investment obligations, undertaken with the purchase of the Lisichansk Oil Refinery.

The only enterprise in the oil processing industry, which kept the traditional pace is "LINOS". Having processed about 600 000 tons of oil in July, the plant plans to process the same volume in the next month. Although it cannot be ruled out that the amounts will increase since in August the perspectives for the internal oil market look rather bad.

The present owners of the oil refineries in Ukraine do not share the optimism of the Ukrainian Government concerning possible construction of a new oil refinery. One of the main arguments against construction of the new plant is the abundance of the oil processing facilities in Ukraine which are not fully loaded. "It is much better to create conditions at the legislative level, which would assist to increase the processing quality at the existing oil refineries", – believes the Executive Director of TNK-ВР Herman Khan.

The President of TNK-BP Ukraine Alexander Gorodetsky informed that for today the project of using the oil pipeline in the direct mode from Odessa to Brody and further to Europe becomes less and less attractive. Nevertheless, "its usage from Brody to Odessa should be maintained and improved".