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Odessa-Gdansk pipeline grows

By VLADIMIR SAPRYKIN, UPI Outside View Commentator   |   Oct. 22, 2007 at 6:52 PM   |   Comments

MOSCOW, Oct. 22 (UPI) -- The success of the informal energy summit held by Azerbaijan, Georgia, Lithuania, Poland and Ukraine in Vilnius, Lithuania, last week will be judged later, when the agreements reached there become reality.

But it was certainly an achievement, because it offered more cooperation possibilities for participants, who endorsed the extension of the Ukrainian-Polish Odessa-Brody pipeline to Poland's port Gdansk and refinery in Plock. The pipeline is designed to pump oil from the Caspian to Europe, bypassing Russia.

The sides' oil producing and transporting companies signed a corporate agreement, which became the first practical step to preparing a feasibility study for the pipeline project.

The president of Kazakhstan did not come to Vilnius, but his energy and mineral resources minister, Sauat Mynbayev, said Kazakhstan viewed the project as a practical possibility and could take part in it.

A scheme of interaction between companies involved in the project should be ready for consideration by spring. They can establish a consortium or opt for some other corporate structure. By that time, the sides should calculate framework transit prices, preparing the ground for practical discussions of the amount of oil to be pumped through the pipe.

The parties to the project -- Azerbaijan, Georgia, Lithuania, Poland and Ukraine -- signed an intergovernmental agreement on creating a legal and contractual framework for its implementation, and can be expected to honor it.

Russia will not be too happy with the appearance of a new oil route to Europe, but this should not affect its gas relations with Ukraine.

The project is a strategic element of Ukraine's policy of integration into the European Union. This is probably why President Viktor Yushchenko proposed drafting a concept of a Baltic-Black Sea-Caspian energy transit space. His meeting with Azerbaijani President Ilham Aliyev during the energy summit points to the growing importance of Azerbaijan as a partner, which is planning to increase oil production.

In principle, Kazakhstan also has enough oil for supplies across the Black Sea.

The project will become effective no sooner than in two years, but the agreements reached at consultations and discussions in Vilnius will facilitate its implementation. Oil companies now need to determine how much oil they will provide to the pipeline and when, while partners should prepare calculations to substantiate the economic expediency of the project for each participant.

There could be some technical problems, though. In particular, the refineries that will process Caspian oil should overhaul their equipment, because it was tuned to refine Russian crude.

The project's endorsement means that the region will have a new source of oil supplies and a new transit junction. Although nobody has ruled out diversification, one more oil route should enhance competition between suppliers and the reliability of oil deliveries to Europe.

Most importantly, this is not a political, but a purely economic project.

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(Vladimir Saprykin is a political commentator for RIA Novosti. This article is reprinted by permission of RIA Novosti. The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.)

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(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

© 2007 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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