Moscow, Kiev Look to Settle Refinery's Management Fight

KIEV -- Kiev and Moscow have renewed efforts to solve a management dispute at Ukraine's largest refinery, which has led to a cut in supplies from Russian producer Tatneft, Ukrainian Energy Minister Yuri Prodan said Tuesday.

He said production at the Kremenchug refinery, controlled by government-run Ukrtatnafta, has halved in the first half of the year compared with the same period last year and, starved of Tatneft's oil, has to buy Iraqi crude.

Prodan said the matter was discussed among officials when Prime Ministers Yulia Tymoshenko and Vladimir Putin met in Moscow on Saturday.

"We spoke about this at the talks with the Russian side and agreed as part of the action plan of the two ministries to create a working group, which would prepare proposals on how to stabilize the work of Ukrtatnafta," Prodan said.

He did not give precise figures for production. In 2007, however, the refinery processed 5.63 million tons of crude against 6.33 million.

The dispute, and cuts in supplies, began in October, when a former manager reinstalled himself at the refinery, citing a court order. He has been in effective control since.

Tatneft, which is also a partial shareholder in the refinery, filed a $1.1 billion suit in May against Ukraine in an international court. It had previously said it was missing $400 million in unpaid bills for oil supplies.

Prodan on Tuesday said the situation at the refinery was unsatisfactory.

"The management of the enterprise is in no state to ensure effective work. The supplies received -- this is Iraqi oil -- are small purchases transported by sea, then by rail," he said.

"Unfortunately there is no oil coming via the pipeline, which is why the refinery's indicators are unsatisfactory."