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Modern economic POTENTIAL OF UKRAINE

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Oil refining industry

Ukraine has a well-developed oil refining industry covering six oil refineries. These have been transformed into joint stock companies: UkrTatNafta CJSC, Lisichansk-NaftaOrgSintez (LiNOS) OJSC, KhersonNaftaPererabotka (Kherson Oil Refining) OJSC, LUKOil-Odessa Oil Refinery OJSC, NaftaKhimik Prikarpatya OJSC (Transcarpatian Petrochemist) and Halychina Oil Refinery OJSC. Control stakes in the Lisichansk and Odessa refineries belong to Russian oil companies: Tyumen Oil Company (TNK) and LUKOil, while KazMunaiGaz of Kazakhstan runs the Kherson refinery.

Reforming the industry via attracting strategic investors for domestic oil refineries has improved the situation in the sector.

Thus, oil refining volumes have risen 2.5 times, from 8.5 mn tons in 2000 to 21.2 mn tons in 2004. Petrol production rose 2.4 times, and the output of diesel fuel went up 2.2 times. Domestic manufacturing of oil products meets the total demand of local consumers.

Petroleum product quality has improved. However, the depth of oil refining remains low at 66%, and the quality of the products fails to correspond to European standards.

The increase in product supplies and competition between large strategic investors (LUKOil, TNK, TatNeft, and KazakhOil) helped organize and stabilize the Ukrainian petroleum product market, solve problems in saturation and quality, and reduce the effect of conjuncture price changes. These improvements strengthened the energy component of every aspect of the Ukrainian economy from state infrastructure to entrepreneurship as well as personal consumption by the population.

The upturn of oil refining in 2001-2002 changed the situation in the local market for oil products. For the first time, the market showed stability and the domination of local products over imported ones. Also, the local resource base was substantial enough to fully meet the demand of agricultural producers for oil products.

As a result of the complete satisfaction of local market demand, oil refineries have greatly boosted supplies of their products for export. However, to satisfy demand for high quality oil products, the country needs the reconstruction of the oil refining industry and the building of new oil refineries.

The application of advanced technologies will improve the economic efficiency of crude oil processing, as the depth of oil refining will grow. Accordingly, the output of motor fuels and other oil products, which will then correspond to world standards, will grow. With higher volumes of top quality oil processing, this step will not only satisfy local demand, but will also boost the export potential of the country while bring Ukraine’s oil refining industry to European standards. By 2030, Ukraine’s oil refining industry is slated to produce all key oil items with an oil processing depth of 90%.

If the facilities and technical level are made available, oil refining plants will fully meet the economy’s needs for quality petrol, diesel fuel, black oil, and 50 other types of refined oil and petrochemical products. Moreover, the industry will still be able to ship notable volumes abroad.

This scenario is encouraged by Ukraine’s geographic location, with the availability of oil handling terminals on the sea, its network of railways, as well as oil and gas mainlines which connect Ukraine to other countries.

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