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Russia to boost crude oil thru pipelines
Journal Staff Report

MOSCOW, Nov. 23 - Russia has agreed to boost supplies of its crude via Ukrainian oil pipelines next year in a move that may further strengthen its position as the dominant energy supplier to European markets.

The agreement, reached Thursday by the countries??™ top energy officials in Moscow, may hamper Ukraine??™s earlier commitments to start shipments of alternative Caspian Sea crude via the same pipelines to Europe.

Russia agreed to boost oil shipments via Brody-to-Odessa to about 9 million metric tons in 2007, up from about 3.7 million metric tons in 2006, the Energy and Fuel Ministry reported. Russia also pledged to boost its oil shipments to Europe via Druzhba, another major oil pipeline crossing Ukraine.

Energy and Fuel Minister Yuriy Boyko reached the agreements with Semyon Vainshtok, the head of Transneft, Russia??™s oil supply monopoly, during talks in Moscow.

Transneft??™s decision to increase supplies of Russian oil via Brody-to-Odessa and via Druzhba suggests that Russia has been seeking to use capacity in both pipelines that may actually leave no room for Caspian oil, analysts said.

???As the result of the 2-month talks with Transneft the decision has been approved to greatly increase transit of oil, first of all via Odessa-to-Brody route and via Druzhba,??? Ihor Kiriushyn, the head of UkrTransNafta, Ukraine??™s oil shipping monopoly, said.

The latest agreements, which will help Ukraine earn extra $20 million next year, underscore ???long-term strategic cooperation??? between Ukraine and Russia, Boyko said. Boyko, appointed to the post in early August, is a long-time advocate of increased shipments of Russian oil via Ukrainian pipelines. Boyko, as the energy minister during the pro-Russian regime of former President Leonid Kuchma, has been opposing supplies of alternative Caspian oil to Ukraine.

Vainshtok also said the latest agreements will benefit both, Russia and Ukraine. ???The issues that we solve will in the end benefit both nations,??? Vainshtok said.

The latest agreements may postpone plans between Ukraine and Poland to work together to try to start shipments of Caspian Sea crude via Odessa-to-Brody to an oil refinery in the Czech Republic.

The project, discussed between Prime Minister Viktor Yanukovych and his Polish counterpart Jaroslaw Kaczynski in Kiev last week, is seen as the first step in starting massive supplies of Caspian Sea to markets in the European Union, a plan that would help the E.U. to cut its dependence on Russian oil.

The successful supplies of Caspian crude to the oil refinery in Kralupy, the Czech Republic, would show that it is technically feasible to move two different types of crude via the same pipeline, Druzhba.

Odessa-Brody line is hooked up with Druzhba at the point of Brody, near Polish-Ukrainian border, which means the Caspian oil could be moved from Odessa to Brody and then via Druzhba to Kralupy.

Druzhba, which has about 5 million metric ton/year spare capacity, is currently moving Russian crude oil to markets in Eastern Europe, but Ukrainian officials have said it is possible to send Caspian and Russian oil via Druzhba without actually mixing the two types of crude.

Ukraine??™s crude oil transit for exports increased 6.1% year-on-year to 27.76 million metric tons in January-October, according to the energy and fuel ministry.

Total shipments, which also include supplies to domestic oil refineries, decreased 4.8% year-on-year to 37.78 million metric tons, the ministry said. (sb/ez)




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