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Tatarstan talks tackle crude oil cutoff
Journal Staff Report

KIEV, Oct. 24 - Ukraine is engaged in emergency talks with the Russian republic of Tatarstan over resumption of crude supplies to its largest oil refinery following a supply cutoff triggered by a shareholder dispute, an official said.

First Deputy Prime Minister and Finance Minister Mykola Azarov said the talks were also needed to prevent any possible aggravation that could force Russia to completely shut oil supplies to Ukraine.

Right now we are holding the talks concerning this situation, Azarov said at a press conference Wednesday. Of course, we are interested in stable oil supplies to this refinery. But not only to this refinery because not only the republic of Tatarstan is challenged, but all of Russia is challenged.

The comments underscore fears in Ukraine that the worsening shareholder dispute at UkrTatNafta oil refinery may actually spill over and affect other Russian suppliers of crude. Russian companies, including TNK-BP, Lukoil, Alliance Oil and Tatneft, own Ukraines four biggest oil refineries.

Tatneft, a regional Russian oil company that produces oil in Tatarstan, on Friday suspended supplies of crude to UkrTatNafta after a surprising court ruling led to a reshuffle of the refinerys top management.

The Sumy court of appeals reinstated Pavlo Ovcharenko as CEO, replacing Serhiy Hlushko, a loyalist of Tatneft, one of the biggest shareholders of the refinery.

Ovcharenko ran UkrTatNafta in 2003 and 2004 and is thought to be loyal to Ukrainian shareholders of the refinery.

News of the talks comes following a warning by Ukrainian Economy Minister Anatoliy Kinakh that the oil supply cutoff may lead to massive oil shortages in Ukraine and may boost gasoline prices.

UkrTatNafta, based in Kremenchuk, controls between 40% and 45% of gasoline and petroleum product market in Ukraine, and any disruption of its operation may have very serious consequences, Kinakh said.

The destabilization of its operations can definitely not be allowed because it could lead to an artificial shortage of oil products on Ukrainian territory," Kinakh said.

UkrTatNafta, which is capable of refining 18.5 million metric tons of crude annually, refined 4.68 million metric tons of crude in January-September, up 2.3% on the year, according to the energy and fuel ministry.

The refinery increased output of gasoline by 6.9% on the year to 1.02 million metric tons, while diesel fuel output rose 3.2% on the year to 1.39 million metric tons, the ministry reported.

The developments come as the dispute had accelerated over ownership of 18% stake in the refinery owned by two entities and that had been apparently controlled by Tatneft.

Ukraines Energy and Fuel Minister Yuriy Boyko said earlier this year that Ukraine will seek to get the stake back into the state ownership that will allow the Ukrainian government to control the majority stake in the refinery.

Tatneft and other Russian shareholders, including the government of the Russian republic of Tatarstan, where most of Tatnefts oil producing assets are based, criticized the plan.

Naftogaz Ukrayiny, the state oil and gas company through which the Ukrainian government owns 43% stake in the oil refinery, pledged to replace top management at UkrTatNafta. But Naftogaz failed to replace the management back in July as Tatneft had persistently blocked the shareholder meeting.

Tatneft halted oil supplies to the refinery on Friday after the Sumy court had ruled allowing Ovcharenko to replace Hlushko.

Azarov, responding to Tatnefts concerns, said Wednesday that the Ukrainian government will make sure that ownership rights are respected in the dispute.

Of course, we cannot simply ignore this, Azarov said. We have to guarantee the owners that the company will not be expropriated in such a way and that they will be able to work calmly. Everything will be fine. (tl/ez)

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USD 26.47 26.30
RUR 0.418 0.418
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