UPI Energy Watch

By JOHN C.K. DALY, International Correspondent   |   Jan. 26, 2005 at 12:32 PM
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WASHINGTON, Jan. 26 (UPI) -- Ukrainian President Viktor Yushchenko believes that the agreement on the reverse of the Odessa-Brody oil pipeline meets Ukraine's interests at the present time, but that these interests could change over time. Yushchenko labeled the construction of the oil pipeline "a unique project for the past few years. This project can be perspective if all its components, including transportation to Novorossiisk function properly." Yushchenko said that at the time when he was the head of the government, Ukraine financed 58 percent of the cost of the project, adding, "I could not understand how the finished oil pipeline could stand idly without pumping oil in either direction." Yushchenko noted that the question of using this pipeline in the reverse direction "was much too politicized. This is a temporary agreement, which meets Ukraine's interests today. But if tomorrow our interests change and the need appears to return to the initial project, we shall use it as it was initially designed." Ukraine completed construction of the Odessa-Brody oil pipeline in late 2001. The pipeline, which was designed to pump 14 million tons of oil annually to Europe by bypassing the Turkish Straits, was idled because the Ukrainian government could not find Caspian suppliers to commit their products for export. Russian companies interested in increasing their oil exports to the European market proposed that Ukraine should use the oil pipeline in a reverse direction - from Brody to Odessa, a proposal at first rejected by Ukrainian authorities. On July 5, 2004, the Ukrainian government reversed itself, removing limits on transporting oil along the Odessa-Brody pipeline exclusively in one direction. Three days later the supervisory council of the Ukrainian oil transportation company Ukrtransnafta allowed the company's board to conclude contracts with Russian-British TNK-BP on filling the Odessa- Brody pipeline. Ukrtransnafta's supervisory council approved the signing of the credit agreement, which provided for an annual flow of up to nine million tons of oil through the Odessa-Brody pipeline in a reverse regime. Under the terms of the agreement Ukrtransnafta has the right to refuse to pump Russian oil and start pumping Caspian oil, in which case it will have to repay the credit early.

On Jan. 25 Iran's leader Ayatollah Seyyed Ali Khamenei met Azeri President Ilham Aliyev in Teheran. During the meeting, which was also attended by President Mohammad Khatami, Khamenei praised the expansion of ties between Iran and Azerbaijan, referred to the ethnic ties between the Iranian and Azeri people. Khamenei called for the expansion of Tehran-Baku ties in the political, security, economic, commercial, and cultural spheres, adding that the United States cannot be trusted and that that Iran and Azerbaijan should never allow their warm ties to be influenced by the policies of foreigners. Khamenei noted that Iran believes all issues, including the issue of delineating the Caspian's offshore waters, can be amiably resolved. Aliyev called Iran-Azerbaijan ties promising and said nothing could harm their expanding relations. Aliyev noted that that the agreements that the two sides are to sign in Tehran on Jan. 26 will further strengthen Tehran-Baku ties, commenting that boosting relations with Iran in all fields is one of Azerbaijan's main national policies.

Russia's Lukoil President Vagit Alekperov has made a working visit to Belgrade to discuss Lukoil's operations in Serbia with the country's officials. Alekperov met with President of Serbia Boris Tadich, Prime Minister Voyislav Koshtunitsa, Minister of Energy and Mining Radomir Naumov, Minister of the Economy Predrag Bubalo and the Director of Serbian Privatization Agency Miodrag Djordjevitch. Alekperov confirmed that Lukoil is interested in expanding its retail operations in Serbia and would welcome even closer cooperation with Serbia's oil company Naftne Industrije Srbije (NIS). Delegation member Dmitry Tarasov, First Vice-President of Lukoil participated in the Lukoil-Beopetrol shareholders meeting, where a report on Fulfillment of Investment and Social Obligations was approved. In Sept. 2003, Lukoil UKOIL paid $ 152.8 million for a 79.5 percent stake of Serbian Beopetrol, which operates nearly 200 filling stations and controls approximately 20 percent of Serbian retail market.

On Jan. 22 the Floating Storage and Offloading (FSO) Bavi at Vietnam's offshore Bachho oilfield ceased cargo operations because of technical problems with its hull. The FSO is used as a floating production and storage unit for oil, which is stored in tanks in the hull of the platform and subsequently transported by shuttle tankers or pipelines to onshore refineries. A full inspection of the FSO will be carried out shortly, which is expected to last up to 2-3 months. During the inspection period, the Bachho field will have only 2 FSOs in operation, which will lead to a significant decrease in the field's daily production.

On Jan. the keel of the 608 tanker project was laid down at Russia's Volgograd Shipyard. The tanker is being built for Norway's Kokoda Product Carriers (Brewing Group), Norway. Three 6,500-ton tankers will be built under the contract. The tanker is 376 feet long and will have a cruising speed of 15 knots. Moscow Narodny Bank (MNB, London) gave a $24.8 million credit for the construction of the tanker.

Kiev's Oil Transport Institute has started the construction of an oil-handling complex near the Yuzhny port in the Odessa port region for a private Ukrainian company. The Institute will construct a reversible oil terminal with an annual capacity of 1.5 million tons of oil A berth to handle tankers of up to 100,000 tons will also be constructed.

Closing oil prices, Jan. 26, 3 p.m. London

Brent crude oil: $46.47

West Texas intermediate crude oil: $49.28

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