Ukraine Plans to Build More Pipelines to Break Russia’s Grip on Fuel

KIEV, Ukraine -- Ukraine, a former Soviet state that depends on Russia for 80% of its energy needs, plans to build new oil and gas pipelines to secure supplies from the Caspian Sea and Iran and counter Russia’s fuel grip.

Naftogaz Ukrainy, Ukraine’s state-owned natural-gas company, is seeking Gaz de France SA’s help in planning a pipeline from Iran. Ukraine also wants to extend its oil pipe to stretch from the Black Sea to the Baltic to secure supplies for itself and ship Kazakh or Azeri crude to states like Poland and beyond. Chevron Corp has said it’s interested in the oil link.

“We should be developing new gas pipelines, new projects like Russia’s’’ pipeline to Turkey under the Black Sea, Ukrainian Prime Minister Yulia Timoshenko said on Friday in the capital, Kiev. “We should be able to ship gas from Turkmenistan and Iran to Europe and this would be a diversification of energy supplies to Europe itself.’’

Ukraine serves as a gateway for most of Gazprom’s supplies to Europe, the biggest consumer of Russian gas. Gazprom last week accused Ukraine of hoarding some gas and on June 9 gave the nation two weeks to agree on price increases for next year.

The pipeline from Iran would cross Armenia and Georgia and pass under the Black Sea to Ukraine and may be extended to Europe, Dmitry Marunich, a spokesman for Naftogaz, said this week. The project may need an $18bn investment, he said, citing industry analysts’ estimates.

“We depend on Russia for 80% of our oil and gas needs and for 100% of our nuclear fuel needs,’’ Timoshenko said. “This is why the government plans to reconstruct the country’s thermal power plants so that the plants would use coal, rather than gas and fuel oil, to produce electricity.’’

Ukraine is examining plans to extend its $500mn pipeline, which runs from the port the Black Sea of Odessa to the Ukrainian town of Brody, further north to the Baltic Sea. The Odessa-Brody link was built by Ukraine in 2001 to compete for the business of hauling Caspian oil.

The Ukrainian government had planned to ship crude through the link to Brody, where it joins the Druzhba pipeline from Russia to Germany. The pipeline had been idle until BP Plc’s Russian venture, TNK-BP, started using it last year to transport Russian oil in the opposite direction, to the Black Sea. Chevron, the second-largest US oil company, may use the Odessa-Brody pipeline to Europe to bypass the Turkish straits, which sometimes delay tanker traffic because of storms and accidents.

Source: Maidan