Posts Tagged ‘oil’

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A crude business – or the return of a slick operation? Odessa Oil Refinery

December 19, 2015

A few years ago, when then President Yanukovych and “family” were busy “collecting” all assets they could possibly buy at knock down rates, coerce, blatantly steal, raid, and otherwise take control of one way or another, an entry appeared regarding the sale of Odessa Oil Refinery to VETEK LLC by Luk Oil.  VETEK LLC being a vehicle then fronted by Andrey Koshel on behalf of the now fugitive Serhiy Kurchenko.

It was, as that entry infers, a murky business – which will come as no surprise.

Odessa Oil Refinery

Odessa Oil Refinery

On 25th November 2014, Odessa Oil Refinery was arrested being an asset of Serhiy Kurchenko, wanted in Ukraine for all manner of corrupt activities.  It is no secret that Ihor Kolomoisky was a firm lobbyist for this asset to be seized/arrested, despite transparent statements of disinterest at the time – “It is not our asset, and we are not interested in it, we have underused Kremenchug plant, and the Odessa refinery should be closed so as not to spoil the ecology of Odessa. Odessa should shine after the loss of the Crimea.”

Indeed, Ihor Kolomoisky’s trusted friend Ihor Palitsa was the Odessa Governor at the time of the asset arrest.

Naturally only the truly naive would believe Mr Kolomoisky’s statement of apparent disinterest, for as this blog stated on the day the refinery was seized “Presumably all oil at Odessa Refinery will now be stored at the State owned Ukrtransnefteprodukt.”  As with all State owned enterprises, there are those with an interest and a certain amount of control over them.

In the case of Ukrtransnefteprodukt?  Ihor Kolomoisky and Sergei Pashinsky.

Since November 2014 little (legitimate and/or overt) has really occurred at the Odessa Oil Refinery – although it is now, suddenly, seeing some activity.

It is rumoured that the management has been told to prepare to have the oil refinery running once more.  Security personnel are being replaced.  It is said employment contracts for refinery personnel are being drafted.

The heavily backed rumour by the local “oil people” is that Ukrtransnefteprodukt has taken over (or is about to take over) Odessa Oil Refinery.  Messrs Kolomoisky and Pashinsky will be pleased to have another State owned enterprise from which to guzzle – no matter how long  Ukrtransnefteprodukt will actually own and/or the refinery.

So what happens to the oil at the refinery when it was seized (if it is still there and hasn’t disappeared into the night ne’er to be seen again)?

How has Ukrtransnefteprodukt lawfully taken ownership?  A court verdict?  A deal with  Serhiy Kurchenko?

With whom has a deal been struck to supply oil to the refinery?

With low oil prices and a global glut of oil, to whom will the refinery sell?

Is the State take over, if the rumours be true, less about oil and more about nationalising an oil refinery asset simply with a view to get it on the State books to then list it for privatising and sell on?  To use an oil trading phrase, is the government plan to assume ownership of this seized asset to then “flip title” to a buyer thus gathering in the profit as swiftly as possible?

If so, is there a potential buyer out there?  It is not an asset for which an argument can be made to retain it upon the State books when all is said and done.

Something local to keep an eye on.  A crude nefarious business – or the a transparent slick operation awaits Odessa Oil Refinery?

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Ukrainian Oil & Gas to get international management?

March 30, 2015

After all the unnecessarily public shenanigans that played out last week between the majority and minority shareholders of Ukrnafta – the State and Igor Kolomoiski – and other potential confrontations, such as Uktransnafta, Prime Minister Arseney Yatseniuk has announced that a change of management, which had a great deal to do with the unnecessarily public collision between State and Igor Kolomoiski, will occur.

It will occur with international management being brought in to insure transparency for all stakeholders.

“A new approach to the state of public companies – Ukrnafta, Ukrtransnafta, and all others, Ukrtatnafta – The state recovers its management, we respect the rights of other shareholders, receive and distribute dividends, and we put in place a new high-quality foreign management.”

First and foremost, a reasonable compromise in light of the aforementioned public spat.  Indeed, perhaps a way to combat corruption at the top of many State owned entities, from energy to the defence entities and beyond.

Naturally to attract the best international industry specific senior professionals, the State and other shareholders will have to pay the commensurate international remuneration (plus perks, and possibly “golden hello’s” and/or “contractually assured “golden handshakes” too) for such management.  That said, it will probably still save the State (and shareholders) a small fortune in losses due to gargantuan corruption by doing so.

The Prime Minister went on to state that “The new leadership will Ukrnefti, it must be selected by an international audit, through professional people with serious international reputation.  “We, the government, decided that now all heads of state companies have elected only in open competition, publicly, live, and no longer can there be inserted a godfather, brother or matchmaker.

Fair enough.

However, the issue will be whether the senior industry specific professionals with a “serious international reputation” can be attracted – and the remuneration + package, is not going to be enough to do that on its own.

As any professional “headhunter” knows, money and perks have to be attractive, but the actual challenge of the job on offer also has to appeal.

Those that have previously been “headhunted” will attest to this being undoubtedly true.  Indeed, your author attests to it being true.

The question therefore arises as to the professional challenges that appeal to these specific international professionals – for the challenges that the Ukrainian companies face will not appeal to all who may be approached, dependent upon the parameters of the job role.

UNM

What is the aim of changing the management?  To insure more transparent dividends for the shareholders and nothing more?

How much of a free hand will any new senior international professionals have to restructure the businesses?  A restructuring that is drastically required.

Can they go through the supply chain like the proverbial dose of salts, reducing or increasing access to the supply chain, whilst undoubtedly annoying a few vested interests in doing so?  Is the supply chain “tiered”, similar to BP for example?  How broad should Tier 1, 2 or 3 be?  Is there a requirement of oversight for any subcontractors/suppliers to those appointed Tier 1, 2 or 3 suppliers regarding quality assurance?

Are they equally at liberty to go through the existing employees with the same proverbial dose of salts, considering many have been placed there through nepotism, rather than on merit?

Whilst corruption and transparency will undoubtedly be atop of the agenda for any new international management, is there scope for corporate expansion during their tenure?  Is there a need for reduction to core competencies?  Perhaps there is a desire to become more of a global player, and more actively tender/bid for international opportunities in due course?  Does the desire exist to act as a (minority or majority) partner in any global opportunities?

It would be foolish to waste the global relationships that senior international industry professionals bring with them, as there is much to be said for personal relationships and the opportunities they can (and generally do) bring.  Would the shareholders want to make that leap as and when such opportunities present themselves?

Whilst it may appear from Mr Yatseniuk’s words above, that Ukraine would be interviewing any serious professional international candidate, it would be rather naive to think of it that way.  The truth be told, it is very much vice versa – Ukraine will be interviewed by the candidates in line with their (primarily managerial) expectations, if they are to make the move from their current positions to those that are on offer.

To be very blunt, there will not be many serious international industry professionals interested in a managerial role confined to insuring that dividends are transparent and duly paid to shareholders.

If, however, the gauntlet is thrown down to turn these State entities into respected and competitive industry players, with a (more or less) free managerial hand to accomplish that, then top quality global candidates there most certainly will be – for the challenge presented would then certainly appeal to many.

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Committees and quorums – Kolomoisky

March 17, 2015

Over the past month, several entries relating to the rise and fall of some or all of the oligarchy have appeared here.  There are those clearly in the ascendancy such as Igor Kolomoisky, and those that are not – pretty much all the others.

Whether the government and presidential administration are reasonably content to allow Mr Kolomoisky to suppress the influence of the others, leaving them the eventual task of having to deal only with Mr Kolomoisky at an opportune moment – or whether he is becoming far too influential to do so, and it is already a matter of managing one oligarch, rather than several, following his peer containment, is a matter of conjecture.

Is far more, or far less, political energy spent containing Mr Kolomoisky after he triumphs in the oligarchical wars, compared to having no oligarch come out on top and having to try and contain all of them?

Whatever the case, it appears Mr Kolomoisky intends to remain atop the oligarchical heap as this extract from a link above outlines:

“Indeed, Mr Kolomoisky and Mr Pinchuk are currently in on-going litigation against each other in the High Courts of London relating to one such historical deal.

Mr Kolomoisky is clearly currently in confident mood, taking all by surprise and giving testimony to the relevant parliamentary committee last week – and whilst doing so insured he mentioned a $5 million per month extortion racket he claims he was coerced into paying to Mr Pinchuk, for delivery to his father-in-law, then President Kuchma. The “Special Control Commission on Privatisation” parliamentary committee was in a closed session – at least prior to Mr Kolomoisky’s arrival.

That Mr Kolomoisky testified before the parliamentary committee at all, without request or summons, whilst (unofficially) one of the most powerful people in Ukraine today, should perhaps be pondered. The committee whilst chaired by his friend Boris Filatov, is not exactly filled with Kolomoisky fans.

So the questions are why did he do it, and to what end?

One of the first outcomes has been “invitations” being sent to Messrs Akhmetov, Pinchuk and Firtash (the latter by video-link being stuck in Austria) to give testimony over historically dubious privatisations by the parliamentary committee. Whether they will take up the invitations remains to be seen – though they would perhaps not wish to waste the opportunity.”

Following that testimony last week, it is now apparent that the “Special Control Commission on Privatisation” has now appealed to the Prosecutor General to investigate the $5 million per month Mr Kolomoisky claims was coerced from him by Mr Pinchuk and then President Kuchma (to the tune of $110 million in total).

filatov1_16

Despite this committee being chaired by his friend Boris Filatov, to claim undue bias of this parliamentary commission is however, perhaps unfair.  It is not overflowing with those who are particularly enamoured with Mr Kolomoisky.  It is though, perhaps, duty bound to raise such allegations with the PGO, it then being a matter for the Prosecutor General to decide if to conduct an investigation – or not.

Whatever the case, Mr Kolimoisky seems intent upon righting historical wrongs he believes done to him whilst he currently sits atop the oligarchy tree.

Yesterday also saw the resignation of Andrei Ivanchuk as Chair of the Rada Economics Committee.  This resignation continuing the inability (despite forthright instruction by Rada Speaker Groisman) for the committee to form a quorum, allowing it to pass changes to the Law on Joint Stock Companies – long awaited by the Rada to vote upon.

This law has expensive implications for Mr Kolomoisky (and others of course).  Thus those MPs loyal to him insure no committee quorum appears when these amendments are on the agenda.  Should the amendments finally pass the committee stage, and then make it through a Rada vote, then Ukranafta, of which Mr Kolomoisky is a major shareholder together with the State, would have to pay an extra UAH 2 billion (approximately) in additional dividends to the State budget.

Naturally these amendments would not only effect Mr Kolomoisky or Ukranefta – however both have become inextricably associated as target number 1 of the changes.  As any such eventual changes will not be retrospective, every day that Mr Kolomoisky can foil attempts to amend the current legislation is financially beneficial for him – though it is doubtful whether this is about the money.

Having associated Mr Kolomoisky and Ukranefta as target number 1 – this is clearly a display of power by Mr Kolomoisky.  Albeit he will not be able to delay the amendments forever, he has more than managed to do so thus far.  He is clearly sending a message when one Rada committee is duty bound to further his cause following his surprise evidence before it, but yet another Rada committee cannot even manage to form a quorum when likely outcomes undermine his interests.

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Odessa refinery shenanigans

November 25, 2014

Following on from yesterday’s entry and the successfully prevented appointment of Petr Hlytsov as Chairman of Odessa Regional Administration – and the anti-reform, ex-Regionaire, Klyuyev puppet constituency of the elite within Odessa that backed him – some commentators are rather speculatively see that his opponent, Mikhail Shmushkovitch, falling tantalizingly close to, but not reaching the 67 votes required to take permanent office, is really a battle between President Poroshenko and Ihor Kolomoyskyi for control of Odessa – when combined with the fact that Igor Palitsia, the current Govenor, is a Kolomoyskyi man who will also be required to resign to take his seat in the next RADA.

Time for a disclosure.

On Friday afternoon this blog was in the office of Alexie Goncharenko at the Regional Administration, shortly after his resignation as Chair.  Discussions about the next Chairman and Governor occurred – although that was not the purpose of being there.

To be blunt, the voting results would have been much closer if Mr Goncharneko had not spent the previous week lobbying the council members hard on behalf of fellow Block Poroshenko  party member Mr Shmushkovitch to become his replacement.

To be equally clear, Mr Goncharenko considers repelling the forces of Mr Hlytsov, albeit temporarily, a victory.

Two weeks ago, whilst Mr Goncharneko was in Strasbourg, Mr Hlytsov began gathering the corrupt and corruptible hordes, those about to be subjected to lustration within the council, and the external local Odessa “players of influence” to his flag.  A case of whilst the cat was away, etc.

Hence, demolishing a good deal of what was nefariously constructed in his absence, Mr Goncharenko deems a victory – and perhaps it is.

By the time the next vote takes place in mid-December, things may look different.  In the meantime, Mr Shmushkovitch assumes the position of “Acting Chair” in place of Mr Goncharenko.

What have all these Regional Council shenanigans got to do with Igor Kolomoyskyi? – Very little.  Whether Mr Shmushkovitch sits in the “Chairman” chair in an acting or substantive role, neither diminishes nor increases the power he holds.  Mr Kolomoyskyi has no candidate in the fight for Chairman of the Odessa Regional Council.  With Mr Hlytsov being a bought and paid for Andrei Klyuyev man, he seems hardly likely to be the preferred choice of Mr Kolomoyskyi.  Therefore, any muted supported for Mr Shmushkovitch from the Kolomoyskyi people (if indeed it was muted) within the Regional Council relate to concessions to be hopefully gained rather than toppling a Poroshenko candidate for the sake of it.

So, if Odessa Regional Council is so unimportant to Mr Kolomoyskyi that he has no runner in the race for Chair, what concessions could he be seeking in Odessa for any “currently restrained” support?  His active  business interests in Odessa at not particularly extensive.  They have not noticeably increased since his friend became Governor either.

Well, one of Mr Kolomoyski’s main interests in Odessa, is in an entity in which he has no interest – financially speaking.  That is the Odessa refinery.

Odessa refinery was sold to now fugitive Sergei Kurchenko, a man thoroughly emeshed within “The Family” Yanukovych regime, and who has currently taken refuge in Moscow for the foreseeable future.

Aside from a governmental need to prevent the refinery working, thus preventing a possibly fraudulently acquired asset generating illicit revenue for “The Family” whilst in Russia – there is also a Mr Kolomoyskyi interest.

Ihor Kolomoyskyi’s Privat Bank has a 42% share in an oil refinery called Ukranafta.  That refinery has not been working at full capacity – thus neither have its profits been all they could be.  Ergo it is in the interests of Mr Kolomoyskyi to see the Odessa refinery officially closed under the auspices of money laundering prevention/further facilitation of fraud that would benefit the previous regime – even if that is not his real driver.

Today, that closure is going to happen.  The Prosecutors Office in Odessa will arrest Odessa Refinery to prevent illicit oil sales.  Mr Kolomoyski’s comment?  “It’s not our asset, and we are not interested in it, we have underused Kremenchug plant, and the Odessa refinery should be closed so as not to spoil the ecology of Odessa.  Odessa should shine after the loss of the Crimea.”

There is no political need to own either Governor or Regional Council to achieve the closure of Odessa Refinery, and in doing so improving the output of Mr Kholomoyski’s Kremenchug refinery.  Owning or renting a prosecutor or a judge is all that is necessary for the asset to be arrested.

Once arrested, there can be no doubt that the refinery will remain closed for some time.  Ukraine is busy trying to privatise assets to get them off of the government books – not put them back on.  Mr Kurchenko will have great difficulty in releasing this asset – and until it is released, nobody can do anything with it.  Presumably all oil at Odessa Refinery will now be stored at the State owned Ukrtransnefteprodukt.

One of Mr Kolomoyskyi major interests in Odessa (in which he has no interest) has been achieved – no Governor or Regional Council (Chairman or otherwise) required.

As for who will become the next Governor of Odessa – a position in which Mr Kolomoyskyi current does have the top dog?  That discussion took place on Friday afternoon too, although all opined on that subject – for now – will remain unwritten.

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Odessa – Poland oil pipeline extension threatened?

May 31, 2013

Could Azerbaijani inaction prevent the proposed 325 kilometer (Ukraine 125, Poland 270 kilometers respectively) Odessa-Brody-Plock oil pipeline extension?

It seems quite likely!

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Oil summits and strategies in Kyiv

September 17, 2011

Whilst the Black Sea Shelf/Sea of Azov exploration plot rush continues apace with the majority of the worlds big oil players and Government of Ukraine, an oil summit takes place in Kyiv involving 300 or so interested individuals/parties. More than anything else, you would imagine that market development and transparency (at least to the usual opaque standards of transparency in oil) would be high on the agenda as Ukraine seeks to import more from nations other than Russia in an effort to reduce dependency on Russia and also gear itself to a streamlined and efficient upstream process relating to its own production with foreign partners.

Ukraine is already seeking to transport more product from Azerbaijan (and if you have never been to Azerbaijan, Baku is well worth a visit) to both Czech Republic and Poland. Coincidently (or not) I am in negotiation to sell some real estate of mine to a family from Azerbaijan, the main bread winner working for the oil industry of Azerbaijan and they are relocating to Odessa.

These things take time of course, particularly if the EU follows its plans to buy from Azerbaijan and Turkmenistan as well, reducing its dependence on Russia and goes direct to Caspian Sea producers in a bid to diversify supply chains a. With Ukraine also looking to do the same, the Ukrainian government seems to be offering reduced port fees to make this more cost effective.

One would hope that when Ukraine eventually moves from upstream to downstream in a meaningful way relating to its own production, those fees will remain low to add domestically produced oil and gas to the list of major exports from the nation with agriculture, chemicals, metals, coal, ores and fertilizers.

It will be an interesting commodity area to watch over the next ten years in Ukraine me thinks!

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Ecology/Environmental planning, registers and protocols

August 29, 2011

With the almost immediate beginning of the Black Sea and Sea of Azov shelves by the likes of the China Petroleum Company, Shell, Chevron, Eni, Petrobrazilia et al, one has to suspect there will be a State encouraged ISO 14001 styled (if not ISO 14001 itself) environmental policy push amongst the larger industrial companies operating in Ukraine.

One has to expect that the larger Ukrainian industries will also be “encouraged” to at least have an Environmental Policy as well, regardless of whether they follow it or not.

For those in desperate need, I still have several I have written for large industrial companies in the past that achieved ISO 14001 on this very computer and backed up on a thumb-drive. They will of course need to be tailored to any specific company however the framework is there and only tinkering required.

Thus I am available for hire free-lance at discounted rates for all of you Ukrainian environmental bad boys who will soon need a good environmental policy that is ISO 14001 compatible, easy to implement with tried and tested audit and reporting procedures together with emergency contingency plans for dealing any incident.

I can produce them in English, Russian or both. They will be as good, if not better, than any the foreign companies submit and work to when operating here.

Just leave a comment, I will not publish it, but I will contact you and put you in front of the inevitable ministerial interest that will come with increased impact from foreign operations and environmental impact in Ukraine.

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