Poland refuses to finance further construction of "Odessa-Brody" oil pipeline

Polish state company PERN Przyjazn has refused to allocate means for further construction of Ukrainian "Odesa-Brody" oil pipeline to Poland, and as a result the project will lose 120 million euro of EU reserved financing, director general of "Sarmatia" company Serhiy Skrypka said on Wednesday in Warsaw.

He informed that PERN representatives did not approve any issue of the agenda yesterday, thus the company would not be able to apply for further financing and would not receive the financing from the European Union. Moreover, PERN representatives said it was impossible to complete the construction of the pipeline itself before 2015, which was one of the requirements to obtain the EU loan. They also opted for revision of project and its possible impact on other projects, being realized by the company to improve energy safety of Poland, namely the construction of an oil terminal in Gdansk. 

Moreover, Skrypka informed that PERN representatives also refused to increase the core capital of "Sarmatia", which is necessary for its further functioning. "If the core capital is not increased, the company will be closed... The company does not have finances to continue its activity on realization of further stages of the project," the official said. 

Skrypka specified that only representatives of the Polish company voted against all issues on the agenda, approved by other shareholders, including Ukrainian "Ukrtransneft", Azerbaijani Socar, Georgian GOGC and Lithuanian Klajpedos Nafta. Moreover,  Ukrainian "Ukrtransneft" confirmed the readiness to finance further construction of "Odessa-Brody" oil pipeline till the Polish border, which would cost the company about 160 million euro. 

Skrypka reminded that the total cost of the project makes 485 million euro, and considering 120 million euro from the EU and Ukrainian contribution, the Polish company has to spend less than 100 million euro. "The position of PERN is rather weird. They agree to support the realization of the project, but nobody knows how," the official summed up. 

As a reminder, the pipeline was originally intended to reach Gdańsk in order to transfer oil from the Caspian Sea (mainly from Kazakhstan) to the Polish Baltic Sea port and from there to the rest of Europe. The Pivdenny maritime terminal in Odessa and the pipeline between Odessa and Brody was built in May 2002 by Ukrnaftogazbud and operated by UkrTransNafta. UkrTransNafta was established to develop the commercial attractiveness of the Odessa–Brody pipeline. However, the pipeline remained unused until 2004.