'Privat' group is building a fuel monopoly

Author : Olena Holubeva

Source : 112 Ukraine

Ukrtatnafta wants to solve its problems at the expense of the state quotas
15:10, 15 August 2018

Open source

Ukrtatnafta company, the operational management of which carries out management associated with the "Privat" group, appealed to the Ministry of Economy with a request to conduct a special investigation of imported petroleum products, as well as establish on its basis quotas for imports of gasoline and diesel fuel. Representatives of Ukrtatnafta, which owns the only private refinery in Ukraine, located in Kremenchug, are confident that thanks to the protectionist measures they will be able to increase the market share and additionally earn 31 million USD from an increase in capacity utilization. However, greenhouse conditions can help start non-operating enterprises, primarily Odesa Refinery, on the basis of which the state enterprise was recently created, and it is managed by the State Property Fund. Experts are sure that ordinary Ukrainians will pay for the fuel monopoly: the implementation of the proposals formulated by Ukrtatnafta may lead to the increase in gasoline prices from 0,11 to 0,14 USD per liter.

Ukrtatnafta (56% of which belongs to private investors – Igor Kolomoysky, Gennady Bogolyubov, Olexandr Yaroslavsky, and another 43% re-owned by Naftogaz) reported that it has sent an application to the Ministry of Economy to initiate and conduct a special investigation into imports into Ukraine of certain refined products. has got a copy of the document, from which the details of the offer became known. It follows that the company asks the Interdepartmental Commission for International Trade to conduct a special investigation into the import of petroleum products to Ukraine and establish on its basis a quota for importing petroleum products for 3 years.

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Since May 1, 2018, Ukrtatnafta proposed to set a quota for the supply of motor gasoline, produced in Belarus and Russia, in the equivalent amount 50% of the Ukrainian gasoline market, which corresponds to 90 thousand tons per month. As for the gasoline produced in other countries, the quota is set at 30% of the Ukrainian gasoline market - 55 thousand tons per month. Since July 1, 2018, Ukrtatnafta suggests reducing quotas for the supply of gasoline from Belarus and Russia to a volume equivalent to 40% of the Ukrainian market - 75 thousand tons produced in other countries - up to 30% of the Ukrainian market, namely 55 thousand tons per month. From October 1, 2018, the quota for gasoline from Belarus and Russia will be set at 30% of the market (55 thousand tons), as for the other countries it will amount to 30% (55 thousand tons per month).

Ukrtatnafta also proposes to establish a quota regime for diesel fuel. Since May 1, no more than 50% of the market should be allocated for Russian and Belarusian diesel fuel (250 thousand tons per month), for the diesel produced in other countries – up to 30% of the market (150 thousand tons). Since July 1 quotas for Russia and Belarus are reduced to 200 thousand tons per month, and from the other countries, this figure remains 150 thousand tons per month.

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Ukrtatnafta suggests charging a duty from the volume of supplies of gasoline and diesel fuel exceeding the size of quotas. It offers 29.3% of the customs value of the goods and 30.7% of the customs value for diesel fuel.

Ukrtatnafta indicates that the share of the Kremenchug refinery, which it manages, is more than 50%in the total volume of gasoline production in Ukraine, on the basis of which the company can be considered a national commodity producer. 640,6 thousand out of 785,4 thousand tons of gasoline produced in Ukraine are accounted for the Ukrtatnafta production. 520.2 thousand out of 626.5 thousand tons of diesel fuel were produced by this company. Another 144,800 tons of gasoline and 106,300 tons of diesel fuel were produced by the Shebelynsky GPP (gas processing plant), which is managed by the state-owned company Ukrhazdobuvannia.

It should be noted that the market share of the Kremenchug plant, according to Ukrtatnafta, has been declining in recent years. In the period 2014-2016, the market share of Ukrtatnafta, according to its own data, declined from 28.4% to 19.9% (in comparison with 2005-2007).


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Ukrtatnafta blames imported auto fuel and assures those restrictions will allow to radically improve the situation.

Ukrtatnafta wants to solve its problems at the expense of the state quotas so that from the autumn of this year there would be at least 40% of Ukrainian fuel on the market.

Experts and market participants say that Ukrtatnafta has problems with the sale of its products, but they have nothing to do with imports. "In fact, the reasons for Ukrtatnafta’s anxiety are much more obvious than it seems after reading the statement. They cannot sell their gasoline and blame it on imports. In fact, reducing the gasoline market by more than 30% over the past four years is problematic. Some people have switched to liquefied gas, others reduced consumption, the territories are lost... At the same time, Ukrtatnafta has no problems with the selling diesel fuel as this is a really popular product," Serhiy Kuiun, director of Consulting Group A-95, noted.

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On the rights of anonymity, several traders told that the problems of Ukrtatnafta are connected with the fact that the company does not work enough to formulate a flexible marketing policy, it does not offer favorable terms for the wholesalers – so it does not use a deferred payment system.

The offer of Ukrtatnafta is not new. "Over recent years, they have repeatedly suggested introducing the duties. Instead of building a system for marketing their fuel, they solve problems with the help of corruption innovations in the legislation," Olexandr Melnychuk, director of the strategic marketing department of TM" BRSM-Nafta," notes.

Ukrtatnafta claims that the biggest threat to the domestic producer is the supply of motor fuel from Belarus and Russia. "This trend was especially vivid in 2014-2016, when the share of supplies from the two countries increased due to other traditional suppliers of gasoline, in particular, Lithuania, Poland, and other countries," the company claims in its statement. According to Ukrtatnafta, Belarus had the largest share in the volume of imported gasoline supplies in 2005-2016, while Russia accounted for only 2.2% (21.6% of supplies falls on Lithuania, 8.2% - on Poland). According to Ukrtatnafta, Belarus and the Russian Federation were the main suppliers in the volume of import of diesel fuel in 2005-2016. The share of Belarus supplies accounted for 43.73%, Russian - 36.41%.

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Against the backdrop of the introduction of protectionist measures, which Ukrtatnafta is seeking, Privat can be in a double win. Protectionist measures are beneficial to Ukrtatnafta, but the production capacity of the state Shebelynsky gas processing plant (controlled by Ukrgazvydobuvannia) is almost exhausted, Sapegin says: "Further increase in the volume of gas condensate processing without reconstruction and increasing the capacity of the plant is impossible."

In addition to the Kremenchug refinery, the Privat group has the most powerful oil terminal in Odesa. Sergei Kuiun states: "If we simulate the situation according to the scenario outlined in the appeal to the Ministry of Economy, Ukrtatnafta can take 100% of the gasoline market and 50% of the diesel fuel market."

The company recalled that "last year the operating enterprises of the domestic oil refining industry - the Kremenchug refinery (Ukrtatnafta) and the Shebelynsky gas processing plant (Ukrgazvydobuvannia) - have completely switched to producing Euro-5 ecological class products." At the same time, "the expected changes in the market did not happen. And without the state support, domestic enterprises cannot fulfill strategic tasks and eliminate dependence on energy supplies from Russia."

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