April 12, 2012 / 4:50 PM / 7 years ago

TNK-BP says Ukraine refinery to stay idle

KIEV, April 12 (Reuters) - Russian oil firm TNK-BP said it was preparing to mothball its loss-making Lysychansk refinery in eastern Ukraine, which it had shut in March, after Kiev refused to curb competing gasoline imports.

Lysychansk cannot compete with Russian and Belarussian refineries, which receive Russian crude without the hefty duties imposed on exports to Ukraine.

TNK-BP, a joint venture between BP and a group of Russian billionaire businessmen, has long lobbied for the introduction of import duties on gasoline and for stricter quality standards in Ukraine, which could curb imports.

But the government, which is preparing for October parliamentary elections, is unwilling to take steps that would trigger increases in gasoline prices.

“So far, we have unfortunately been unable to find a balanced compromise solution,” TNK-BP Executive Vice President German Khan told reporters in Kiev after meeting senior Ukrainian government officials.

“Because of this, we had to halt oil supplies to ... Lysychansk in March and are now preparing it for conservation.”

Lysychansk has the capacity to refine about 7 million tonnes of oil a year and is one of the most technologically advanced refineries in Ukraine.

Russia levies duty tied to global prices on all oil exports except those to Belarus and Kazakhstan, which are members of a Moscow-led customs union.

The Kremlin has long urged Ukraine to join the union, but Kiev has chosen to negotiate a free trade agreement with the European Union instead. (Reporting by Olzhas Auyezov, editing by Jane Baird)

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