Caspian oil and its transportation to the EU without the use of Russian pipelines is one of those alternatives. It is viable and does not need much in terms of investment and effort because there is already a pipeline that connects the Ukrainian port of Odessa with the Polish border. It is called the Odessa-Brody line. This line was at the center of discussions at the Caspian, Black Sea and Baltic countries' third Energy Summit, held in the Ukrainian capital of Kyiv last week. Attendees included the presidents of Azerbaijan, Georgia, Poland, Estonia, Latvia and Lithuania; EU Energy Commissioner Andris Piebalgs; and officials from 30 other countries, the United Nations, the Organization for Security and Cooperation in Europe (OSCE), World Bank and European Bank for Reconstruction and Development. The summit examined the possibilities for creating new export routes and new energy sources for the EU.
In the end the presidents of Azerbaijan, Georgia, Ukraine, Poland and Lithuania agreed on steps to create a Euro-Asian Oil Transportation Corridor, something which is in fact about the extension of Odessa-Brody line.
Ukraine, which has the most to gain from the extension, also put forward a proposal for setting up an Organization of the Oil Exporting Countries (OPEC)-type gas transportation cartel for transporting energy resources bypassing Russia. This was a new idea voiced by Ukrainian President Viktor Yushchenko, and reactions to it were mixed. While Georgia applauded it, Azerbaijan remained neutral, and Poland, Estonia, Latvia and Lithuania -- all members of the EU -- asked for time to consider it.
Ukraine built the 674-kilometer Odessa-Brody pipeline in 2001, with the expectation it would compete with other routes, mainly Russian, for the expanding and lucrative job of transporting Caspian oil to Western markets. Azeri and Kazakh crude oil, a high-quality blend, needed to avoid being transported by the existing pipelines, where it could mix with the sour Russian-Ural blend.
Constructing the Odessa-Brody route, which starts at the Black Sea port of Odessa and ends at the Polish border in Brody, was seen as an ideal solution. The pipeline's first phase was put into operation in May 2002. It had a throughput capacity of 9 million tons, with the potential to reach 14.5 million tons annually.
However, upon completion the pipeline remained empty and unused for three years because Russia blocked Odessa access to oil from Kazakhstan. Assurances by the administration of US President George W. Bush to the Ukrainian side in 2003 that American companies would supply sufficient oil from Kazakhstan to Odessa did not bear fruit. Disillusioned by a lack of support and help from both the US and the EU, Ukraine was forced to reach an agreement with Russia on the reverse use of the new pipeline, whereby Russian oil would be pumped from Brody to Odessa.
This change of route from north to south of course dealt a major blow to the project's original aim to diversify pipeline-delivered oil supplies to the EU and reduce dependence on Russia. In addition to this failure, the change of route also halted the planned extension of the pipeline from Brody to the Polish refinery at Plock and then on to the port of Gdansk on the Baltic Sea.
Now, with the Kyiv summit's revitalization and endorsement of the extension of the Odessa-Brody line, a new chapter in EU energy strategy may unfold in few years' time, depending upon the determination of the parties, and it seems the EU is determined this time.
If realized, the line will decrease EU dependence on Russian oil and make Ukraine a major transport corridor for Caspian oil.
