Emergency Measures To Be Taken To Fight Crisis On Oil Products Market

Following a cessation of oil imports from Russia and a subsequent deficit of oil products in Ukraine, Lukoil and TNK-BP limited gasoline sales to 10L per car. Kherson refinery prolonged its repairs until the end of May contributing further to the deficit.

The inability of the government to curb oil products prices by regulative methods received criticism by President Yushchenko yesterday. To diversify oil supplies, the government has already agreed to purchase 70K mt of oil products from Moldova and the Baltic states and plans to buy 300-500K of crude in Kazakhstan in June 2005. Besides, Prime Minister Tymoshenko said the government will push Ukrnafta to construct an additional 1,000 gas stations to decrease dependency on Russian companies operating in the retail market. Construction of a refinery with a throughput of up to 10 mn mt in Odessa by 2007 will serve the same goal, according to Tymoshenko. In addition, Tymoshenko urges the Parliament to consider measures for simplification of oil product imports.

Concorde Capital: We expect that the oil products price crisis will be resolved within 1.5 months, and the government will pursue a more liberal policy in regard to price formation in the market. Oil supply diversification measures will give a dampening effect, but will not fully prevent price growth as long as global oil prices are high. Construction of 1,000 gas stations would be very positive for Ukrnafta establishing its leadership in the market, but we do not see this as a feasible project. We also think that construction of a refinery in Odesa by 2007 is an over-ambitious goal.  Nonetheless, Tymoshenko fighting Ukraine?s dependency on Russian oil/gas is a good thing.