October 23, 2007 / 11:52 AM / 12 years ago

UPDATE 2-Ukraine refinery seeks crude amid row with Tatneft

(Adds Russian Energy Ministry, Tatneft, traders throughout)

By Pavel Polityuk and Dmitry Zhdannikov

KIEV/MOSCOW, Oct 23 (Reuters) - Leading Ukrainian oil refinery Kremenchug has called tenders to buy crude from Russia and Ukraine as its stocks run low due to a dispute with Russia’s Tatneft TATN3.MM, managers in control of the plant said.

Pavel Ovcharenko, who used armed police last week to oust the previous head of the company running the refiner, Sergei Glushko, told a news briefing on Tuesday Kremenchug had enough oil stocks to run for another 12 days at reduced capacity.

Oil company Tatneft, the main supplier to the refinery, last week stopped delivering crude, saying it wanted the situation with the management to be clarified. Tatneft supported Glushko as the top manager.

“We are running a tender and want to buy some 200,000 tonnes of Ukrainian crude. We are also holding talks with (Russian firms) TNK-BP TNBPI.RTS, LUKOIL (LKOH.MM), Surgut (SNGS.MM), Rosneft (ROSN.MM) and Gazprom Neft (SIBN.MM) for the delivery of around 300,000-350,000 tonnes in November,” said Ovcharenko.

These volumes combined would cover 70 percent of requirements at Kremenchug, which usually processes 180,000 barrels per day of Russian crude. The plant has already stopped one of its two primary distillation units this week.

“We hope the issue will be solved within two to three days and we will get supplies from Tatneft or other firms, because there is no difference after all,” he said.

Russia and Ukraine have had repeated disputes over energy supplies in recent years. These included a halt in Russian gas supplies in January 2006, which led to disruptions in gas deliveries to Europe via Ukraine.

Tensions peaked when pro-Western parties were coming to power in Ukraine and analysts expect relations between Moscow and Kiev to worsen again as Yulia Tymoshenko prepares to become prime minister after parliamentary elections this month.

She is likely to replace current Prime Minister Viktor Yanukovich, who is seen as more willing to work with the Kremlin. Relations between Moscow and Kiev plunged to their lowest during Tymoshenko’s previous premiership in 2004.

POLITICAL MOTIVES

Tatneft has said politics was behind the actions at the plant but gave no explanation. On Tuesday, it issued a statement accusing Ukraine’s leadership of ignoring its calls, saying the plant was facing a “technological and financial crisis.”

Russian Energy Minister Viktor Khristenko told reporters in Moscow: “We think the situation is absolutely abnormal and we will be holding an active dialogue to support Tatneft.”

Ovcharenko, who ran Kremenchug before Glushko and says he has been reinstated to his position by a court ruling, has accused the previous management of accumulating heavy debts.

Analysts said it was difficult to understand the real reasons for the conflict, which will have a negative impact on Tatneft bacause Kremenchug is its only refining asset.

“Tatneft will have to direct approximately 400,000 tonnes per month to the domestic market,” Alfa Bank said in a note, predicting a decline in domestic crude prices.

It added that Tatneft could not export these volumes as most of its 500,000 barrels per day output was heavy oil, which would depress the quality of Russia’s crude export blend, Urals.

Traders at Russian oil firms said they had not yet seen any tender documents from Kremenchug.

“I doubt we will go there bypassing Tatneft anyway. It will first of all be very expensive for the Ukrainians. And secondly, Tatneft will likely ask us not to do it, to show our support,” one trader said.

Tatneft has directly and indirectly owned over 30 percent of Kremenchug’s managing firm, UkrTatNafta, since the 1990s and jointly managed the firm with Ukrainian state company Naftogas.

Tatneft has repeatedly accused Ukraine of diluting its stake in UkrTatNafta, while Ukrainian officials have questioned the way the refiner was privatised. (Additional reporting by Tanya Mosolova and Vladimir Soldatkin in Moscow, writing by Dmitry Zhdannikov, editing by Douglas Busvine and James Jukwey; + 7 495 775 12 42, dmitri.zhdannikov@reuters.com))

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