Ukraines government has made clear its goal of becoming a transit center for Oil from the Caspian Sea region. Oil production from the region is expected to increase from 600,000-800,000 bbl/d over the next five years. One potential conduit for this oil in the Black Sea region is the Odessa-Brody Pipeline. The pipeline was completed in 2001 and extends from Ukraines Black Sea port of Odessa northward to the city of Brody. The pipeline was initially intended to load 300,000 bbl/d of Caspian Sea oil from the newly completed Black Sea marine terminal, Pivdenniy (or Yuzhniy) and carry it northward through the Ukrainian system to Europe. However, for approximately three years the pipeline remained mostly dormant because Ukraine was unable to secure oil supplies from Caspian Sea area suppliers. Russia is now using the pipeline in the reverse direction, moving oil from the Urals basin southwards to tankers in the Black Sea and onwards to world markets. Since January 2003, TNK-BP has used the last 32-mile leg of the pipeline (in reverse) for these purposes. corridor for oil and Natural Gas to transit.
Faced with the possibility of losing direct access to Caspian Sea region oil, European governments have voiced their opposition to the reversal project in newspaper articles and public statements. Leading Caspian Sea region producer, Kazakhstan, has also taken counter-measures. In July 2003, for instance, Kazakhstan agreed to help construct a 32-mile pipeline parallel to the segment currently being used in reverse to transit Russian oil. In 2004, the Ukrainian government pledged that its final intent for the pipeline would be for it to flow from Odessa north to Brody. But while the pipeline sat idly, the Ukrainian state oil company UkrTransNafta, effectively reversed that decision, declaring that it had accepted an offer from the Russian-British company TNK-BP to ship 180,000 bbl/d from Brody south to Odessa (in reverse). On a temporary basis, in September 2004, the first tankers shipped from Odessa with Russian Crude Oil, and the 32-mile pipelines initial capacity level was roughly 97,000 bbl/d. Total exports of oil from Odessa totaled over 500,000 bbl/d during 2004.
If the pipeline does run in its originally intended direction, from Odessa to Brody, then Ukraine would like to extend the pipeline from Brody to Plock in Poland, and then Gdansk on the Baltic Sea. The European Bank for Reconstruction and Development (EBRD) has stated it may make more economic sense to construct the extension further to Wilhelmsaven, Germany, where it would avoid the crowded straits off the Danish and Swedish coast. Ukraine has yet to secure contracts for Caspian crude oil supply, and industry players have publicly stated that Caspian crude oil will be unlikely to displace cheaper Urals blend crude oil from Russia at central European refineries. Also, the refinery at Plock would have to be upgraded to accommodate the lighter quality Caspian crude. Currently, Ukraine and Poland are studying the feasibility of various extension plans, and the results are expected in the next several months.