WEDNESDAY, JULY 18, 2018
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No progress reported in Tatarstan talks
Journal Staff Report

KIEV, Oct. 25 - Ukraine and the Russian republic of Tatarstan have made no progress so far in talks aimed at resumption of crude supplies to Ukraine’s largest oil refinery, Tatarstan’s oil company Tatneft reported Thursday.

Tatneft suspended supplies of crude to UkrTatNafta, an oil refinery in Kremenchuk, Friday after a surprise court ruling led to the reshuffle of the refinery’s top management.

The Ukrainian government has been engaged in emergency talks with Tatarstan for days seeking to resume the supplies amid fears the refinery’s operation may shut completely and incur significant damage.

“Tatneft and the Cabinet of Ministers of Tatarstan are forced to express regrets that the Ukrainian authorities have so far failed to make any considerable actions to stop the fraudulent” takeover of the refinery, Tatneft said in a press release.

The statement indicates the oil supply cutoff to Ukraine’s largest oil refinery will continue, increasing concerns over the refinery’s operation and may even trigger a forced shutdown.

The deadlock at the talks between Ukraine and Tatarstan also fuels fears that the shareholder conflict at UkrTatNafta may spill over and affect Ukraine’s dealings with other Russian oil companies.

Ukrainian First Deputy Prime Minister and Finance Minister Mykola Azarov, underscoring the importance of the talks, said Wednesday the development is “a challenge not only to Tatarstan, but also to all of Russia.”

Russian oil companies, including TNK-BP, Lukoil, Alliance Oil and Tatneft, own four biggest Ukrainian oil refineries out of six that operate in the country.

Tatneft, which produces oil in Tatarstan, on Friday suspended crude supplies to UkrTatNafta after the court ruled allowing the reshuffle of the refinery’ top management.

The Sumy court of appeals re-instated Pavlo Ovcharenko as the CEO replacing Serhiy Hlushko, who is thought to be loyal to Tatneft, one of the shareholders.

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

The reshuffle comes as the refinery has been embroiled for months in a dispute over ownership of 18% stake owned by two entities and that had been apparently controlled by Tatneft.

The control over the stake is crucial as it de-facto gives control over the refinery to either Tatarstani shareholders, including Tatneft and the Tatarstani government, or to the Ukrainian government.

In May, Naftogaz Ukrayiny, the national oil and gas company through which the Ukrainian government owns 43% stake in UkrtatNafta, reported that it had successfully returned the 18% stake back to the state ownership via a court ruling. This, Naftogaz said, increased its stake in the refinery to 61%, gives it the total control over the refinery.

But the Tatarstani shareholders, including Tatneft, contested the return of the stake and had effectively blocked in July a shareholder meeting that was supposed to re-shuffle the refinery’s top management.

The latest reshuffle on Friday opened the way for a shareholder meeting that may successfully consolidate the Ukrainian stake at 61% making the change of ownership irreversible.

Ukraine’s Energy and Fuel Minister Yuriy Boyko, who once ran Naftogaz Ukrayiny and was the CEO of UkrTatNafta several years ago, is the biggest advocate for transferring the 18% stake to Naftogaz.

Boyko said earlier this year that the stake will be transferred to Naftogaz to make it a vertically-integrated oil company that will be capable of competing with Russian oil majors dominating the Ukrainian gasoline market.

Ovcharenko, the new CEO of UkrTatNafta, already scheduled the meeting on Nov. 15, and had been making steps that would make it easier for Naftogaz to acquire the 18% stake, according to Tatneft.

“We don’t yet clearly know reasons and persons on behalf of whom Ovcharenko is acting,” Tatneft said. “But certain conclusions can be made about what are the reasons and who are the persons.”

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

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