"The main thing we will gain is confidence in tomorrow. Because when Russia begins filling 'the eastern pipe' and delivering oil to China, we will be able to work with a larger amount of Russian oil," Yuriy Boiko said.
Boiko said that oil transit will be increased by 5 million metric tons annually (100,685 bbl/d), which will give Ukraine about $20 million in additional revenues. He added that natural gas transit talks, which are still underway, will likely result in a 3-5% increase.
Russia's state-controlled pipeline monopoly Transneft [RTS: TRNF] and Ukraine's Ukrtransnafta reached the oil transit volume increase agreement November 24, 2006.
The Ukrainian government said Tuesday the country's oil refineries intend to increase their oil-refining volumes by 15% in 2007 compared with 2006, to 15.4 million tons per year (310,110 bbl/d).
"The increase in crude refining and production output is connected with plans to launch the Odessa oil refinery this year following maintenance," the government press service said.
An energy dispute between Russia and Belarus, the two ex-Soviet republics working to forge a Union State, at the start of 2007 affected Russia's European consumers.
Moscow briefly cut off crude oil deliveries as Belarus started siphoning off oil as payment in kind for its transit services. Russia refused to pay the punitive transit fee Minsk imposed in response to the Russian export duty.
Russia agreed to cut the export duty from $180.7 to $53 per metric ton, effective January 1, 2007. The two countries initialed a relevant agreement January 12.
The standoff, which drew parallels with an energy row with Ukraine involving natural gas in January 2006, triggered further accusations in Europe that Russia is using its hydrocarbons as a political weapon and discussions on the need to diversify energy sources.
The oil transit volume increase will prevent Russian oil companies from having to decrease oil production in case of similar conflicts.
Another step aimed at ensuring that Russia remains a reliable partner and protect Russian oil companies in the event of another energy dispute is the intention to expand the Baltic Pipeline System (BTS) to 110,000-120,000 metric tons annually (2,416 bpd), which is yet to be made by the Russian government.
Transneft suggested the move following the January oil transit crisis, and Russian Industry and Energy Minister Viktor Khristenko said January 9 that Russia will in the next two to three years increase direct oil deliveries through the Baltic states.
"This means risk coverage for the producing side, and risk reduction for oil consuming countries," he said.
Transneft said late last year it increased in advance the capacity of the Baltic Pipeline System, a direct pipe from Russia to Europe, from a projected 72 million metric tons a year (1.45 bbl/d) to 74 million (1.49 million bbl/d).
The system, launched in 2001, supplies Siberian oil to the Primorsk terminal bordering on Finland for export to Europe and the United States.
