Crimea Oil & Gas Grab To Prolong Russian Dependency

BMI View: The Crimean authorities' claim of ownership over oil and gas assets in the region could have a short-term impact on fuel supplies to Ukraine. However, more significantly it is creating an increasingly uncertain situation with regards to Black Sea assets and the future of exploration licences. The Crimean offshore was a key part of Ukraine's strategy to develop domestic resources and reduce the impact of gas Russian imports. Its potential loss to Russia will therefore only work to prolong gas import dependency with very limited options for Ukraine to diversify.

Pro-Russian militia took control of the Feodosia crude and petroleum products terminal in Crimea on March 17, according to a report by Platts. The terminal is able to handle around 240,000 barrels of crude and petroleum products a day at maximum capacity, or as much as 70% of Ukraine's daily petroleum product consumption. The site is home to a 280,000 cubic metre oil storage facility and is linked by railroads to Ukraine's refining centres. The Feodosia facility was taken over following the move by the Crimean Parliament to declare oil and gas producing and handling assets as state owned. Operations at the Feodosia port are reportedly suspended.

The loss of the Feodosia port from Ukrainian government control could impact the country's fuel supplies over the short-term, particularly gasoline, while the facility remains offline. As a result the Ukrainian Minister for Energy and Coal, Yuriy Prodan, is due to request a cancellation of currency restrictions on oil traders in order to enable increased gasoline imports. The government had previously restricted hard-currency purchases due to the country's struggle with balance of payments. De-restricting oil traders could place further pressure on the country's near-term finances, putting greater pressure on securing a monetary deal with the IMF and EU. While Ukraine has sufficient refining capacity to meet local demand, ageing facilities and inefficiency are driving underutilisation meaning it remains reliant on imports of gasoline.

Dependent On Gasoline Imports
Ukraine Gasoline Production & Consumption

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Related sectors of this article: Oil & Gas, Upstream, Exploration, Unconventional, Energy Policy, Marine and Subsea
Geography: Ukraine, Russia

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