2 Oct 2009 16:04

Lukoil suspends operations at Odesa refinery

MOSCOW. Oct 2 (Interfax) - Lukoil has decided to suspend operations at its Odessa refinery in Ukraine due to the actions of Ukraine's OJSC Ukrtransnafta, which stopped pumping oil along the Lisichansk - Kremenchug - Odesa route on October 1, the Russian company said in a press release.

Alternative oil delivery routes being proposed by Ukrtransnafta would substantially raise the cost of the oil and render the Odesa refinery unprofitable. One proposed route, to ship Russian oil through Belarus through Brody to Odesa would increase transportation costs by $5.7 per tonne.

Moreover, Transneft does not have the technical ability to deliver oil to the Odesa refinery on other routes in October this year.

Therefore, Lukoil has been compelled to shut down the refinery for an indefinite period.

"Layoffs cannot be ruled out if oil deliveries to the refinery do not resume in the shortest possible time on economically justified terms, given Transneft's technical capabilities," the press release says.

In addition, "this has the potential to cause a shortage of high-quality fuel, leading to higher prices and the appearance of low-grade fuels on the market," it says.

Lukoil management is bending every effort to find a solution to resume operations at the refinery.

Lukoil President Vagit Alekperov said he plans to discuss the situation surrounding the Odesa refinery with Ukraine's leadership next week, a source at Lukoil told Interfax.

A Ukrainian government source told Interfax that the Ukrainian government plans to hold a session in Odesa early next week.