Ukraine's Oil and Gas Sector
Refining/Downstream
Ukraine has six crude oil refineries, with a combined throughput capacity of approximately 1 million
bbl/d. However, with domestic demand at just over 30% of the country's refining capacity, Ukraine's
refineries are operating significantly below capacity. Until recently, Ukraine's refineries did not even
receive enough crude oil supplies to supply the country's domestic petroleum product demand.
Ukraine has begun to achieve better results in securing sufficient crude oil supplies for its refineries
by offering oil exporters in Russia and Kazakhstan a stake in the country's refineries.
In March 1999, Russia's Lukoil paid $7.2 million for a 51.9% stake in Ukraine's 78,000-bbl/d Odessa
refinery, the country's fourth largest in terms of refining volumes. Since its original purchase, Lukoil
has increased its stake in the refinery to 94% by purchasing additional shares on the secondary
market. Lukoil has invested over $2 million in reconstructing the Odessa refinery.
Russia's Tyumen Oil, through its subsidiary TNK-Ukraina, acquired 67% of the 320,000-bbl/d
Lisichansk (LiNOS) refinery in July 2000, then increased its stake to 78% in October 2000. The
company is carrying out an investment program to modernize the plant over the next five years and to
boost its design capacity. In June 2001, TNK-Ukraina signed an agreement with a German bank to
expand an existing $50 million credit for the refinery, with the additional financing planned to be used
to fund a stable supply of crude oil to LiNOS and eventually increase production. In recent years, the
refinery's output has been limited by shortages of crude oil.
Ukrtatnafta is a joint venture between Ukraine’s Kremenchuk refinery (43%) and several Russia’s
entities including Tatneft producer, Tatnefteprom and others who own another 57% of the joint
venture. The Kremenchuk/Ukrtatnafta refinery enjoyed cash and crude injections from Russian
partner Tatneft that helped to pay off debts. Ukrtatnafta purchases itself about 80% of all crude it
processes. Having reliable financial backing, Ukrtatnafta is expanding its wholesale presence by
aggressive marketing. Ukrtatnafta is developing its own retail network and has a number of modern
gas filling stations in Kremenchuk, Poltava and Kyiv.
Finally, Kazakhstan's state oil company, Kazakhoil (now Kazmunaigaz) purchased 60% of the
Kherson oil refinery in November 2001. In May 2002, however, Kazmunaigaz announced plans to sell
its stake in the Kherson refinery, owing to difficulties in meeting its commitments to ensure 36,000
bbl/d of oil annually to the refinery and to invest $250 million to modernize the plant. Russia's Rosneft
has signed a preliminary agreement with Kazmunaigaz to purchase the 60% stake in the Kherson
refinery although preference may be given to Russia’s Allianz Oil which already holds stock in the
refinery.
