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Ukraine to send inspectors to refinery
Journal Staff Report

KIEV, Aug. 29 – Ukraine will send a special team to an oil refinery owned by Russian oil major Lukoil to check whether the company is making any progress with its massive modernization, an official said.

The team will travel to check Lukoil-Odessa refinery a year after the Russian company closed the complex for a $320 million three-year modernization, Ivan Plachkov, the governor of Odessa region, said.

The inspection comes days after another Russian oil major, TNK-BP, announced it will be closing its Linos oil refinery next month for at least 45 days of maintenance.

The government fears the closures of the oil refineries may trigger a wave of gasoline price hikes next month despite the government’s efforts to encourage oil firms to boost gasoline production in Ukraine.

Analysts said that high oil prices on world market encourages Russian oil companies to export crude rather that to ship it to their refineries in Ukraine. Most of the Ukrainian refineries produce low-grade gasoline or, like Lukoil-Odessa, fuel oil, which is later exported overseas.

The fact that the government will send a special team to Lukoil’s oil refinery suggests that there were increasing suspicions that the modernization had not been proceeding as scheduled.

Plachkov was energy and fuel minister last year and earlier this year and had been briefed abiut Lukoil’s modernization plans.

Lukoil signed a trilateral agreement with the government and Odessa administration in June 2005 in which it guaranteed that there would be no layoffs after the modernization is completed.

“It’s necessary to find out whether the leadership of the oil refinery has met the obligations,” Plachkov said in Odessa.

The development may be an indication that the government is trying to use levers to pressure the Russian oil companies less than two weeks after a deal was signed in which the Russian and Ukrainian oil firms pledged not to increase gasoline prices.

The oil companies agreed to boost supplies of crude oil to the country, while the government has agreed to increase duties on imports of gasoline, making oil refining in Ukraine more profitable. (nr/ez)




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