Ukrainian PM meets Bodman for talks on oil, natural gas

Kiev (Platts)--5Dec2006

Ukraine's Prime Minister Viktor Yanukovych and the US Energy Secretary
Samuel Bodman discussed greater use of Ukraine's energy transit capacity and
construction of new oil and gas pipelines in Ukraine, the government's press
service said Tuesday.
Yanukovych and Bodman discussed Caspian Sea oil supplies to Europe
through Ukraine's Odessa-Brody oil pipeline, the press service said.
Yanukovych, who is currently in Washington on a four-day visit, also met
Vice-President Dick Cheney to discuss energy security in the region, the press
service said.
The US has long argued that starting Caspian crude oil supplies via
Odessa-Brody oil pipeline to the European Union would help improve energy
security in the region. Ukraine, also as the most Central European countries,
such as Poland, the Czech Republic and Hungary, depend on Russian crude oil
and natural gas supplies. However, these countries, as well as the European
Union and the US, expressed concerns over energy security after Russia had
suddenly cut gas supplies to Ukraine in January, causing sweeping supply
disruption within the EU.

RUSSIAN PRESSURE
Ukraine built the Odessa-Brody pipeline in August 2001, but it had
stayed idle for three years as the Ukrainian government had failed to secure
supplies of Caspian oil matching demand. The pipeline is capable of moving up
to 12 million mt of crude annually, but it needs to ship at least 5 million
mt/year to make profits. Russia has been persistently putting political
pressure on Ukraine to scrap plans of moving Caspian crude in favor of
shipping Russian oil, a plan that would further strengthen Russian dominant
position as the oil supplier in Europe.
Eventually, Russia started to move its own oil via Brody-to-Odessa route
in September 2004 thus blocking any Caspian shipments via Odessa-to-Brody.
Russia promised to move up to 9 million mt/year, but is expected to ship less
than 4 million mt in 2006, Ukrainian officials said.

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