Russian foreign direct investment in Ukraine

Nataliya Blyakha                                                                                       PEI Electronic Publications 7/2009 

www.tse.fi/pei 

 

 

Ukraine which was built in 1938. Since 1999 reconstruction and upgrading project has 

been implementing on the basis of intergovernmental agreements between Ukraine 

and Kazakhstan. Alliance Group and “Kazmunaigaz” have signed long-term supply 

contracts to deliver oil to Kherson Refinery. Since 2003 “Alliance Ukraine” Oil Company 

has been an operator of intergovernmental Kherson Refinery Upgrading Program. 

Reconstruction and Upgrading Program have been implemented at the refinery since 

2001 and it is scheduled till 2010. (Herasimovich, 2008) The holding company Alliance 

Group intends to invest in the modernization of the Kherson oil refinery $ 450-500 

million until 2010. (Volkov 2007) 

Ukrtatnafta is a joint venture between Ukraine’s Kremenchuk refinery (43%) and 

several Russia’s entities including Tatneft producer, Tatnefteprom and other 

companies that own another 57% of the joint venture. Ukrtatnafta refinery enjoyed cash 

and crude injections on part of Russian partner Tatneft. Ukrtatnafta purchases itself 

about 80% of all crude it processes, while associated companies (Dobrobut, Sigma and 

others) supply the rest through processing deals. Ukrtatnafta is developing its own 

retail network, having a number of gas filling stations in Kremenchuk, Poltava and Kiev. 

Since November 2007, Ukrtatnafta sharply have been reducing processing operations. 

This was caused by raw materials supply termination by Russian Tatneft because of 

the corporate conflict. (Baran 2005) 

TNK BP  

Russia’s third largest oil producer TNK-BP is one of the largest oil companies 

operating in Russia. It is engaged in the exploration, production, refining, selling, 

trading and marketing of crude oil and natural gas in Russia and Ukraine. The 

company also provides oilfield services. The company’s principal operating areas 

include Khanty Mansiysk, Yamalo Nenets Districts, Tyumen Region and 

Nizhnevartovsk in West Siberia, Irkutsk Region in East Siberia, Saratov and 

Orenburg region in Volga-Urals, Ryazan near Moscow and Lisichansk in Ukraine. 

The company is headquartered in Tyumen Oblast, Russian Federation and employs 

60,000 people. 

The company was formed in 2003 as a result of the merger of BP’s Russian oil and 

gas assets and the oil and gas assets of Alfa Group, Access Industries and Renova 

– together known as AAR (Table 5). 

 

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Nataliya Blyakha                                                                                       PEI Electronic Publications 7/2009 

www.tse.fi/pei 

 

 

Table 5 

Major shareholders of TNK BP 

Major shareholders 

Share,%

BP 44.8 

Alfa Group Consortium, Access Industries, 

Renova 

44.8 

TNK-BP Holding subsidiaries 

5,2 

Other  

5,1 

 

Company also has 2,100 retail service stations, mainly operating under the TNK and 

BP brands. Through this retail network, TNK-BP has become one of the market 

leaders in petroleum product sales in European Russia (including Moscow) and is 

the market leader in Ukraine. TNK-BP started its operations in Ukraine on June the 

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, 2004. The corresponding decision has been made by the international 

holding’s management in connection with the accelerated pace of development of 

the business in Ukraine. 

In 2005, the international holding TNK-BP has decided to independently engage in 

the wholesale trade of oil products in Ukraine. For this reason in 2005 was 

established “TNK BP Commerce”, that is responsible for the wholesale trade of oil 

products, which subsequently are sold through a network of filling stations. To date, 

“TNK-BP Commerce” is one of the largest operators of the fuel market in Ukraine, 

through the sale of Lisichansk Oil Refinery petroleum production to the domestic 

market and for export. TNK-BP has five refineries in Russia and one Ukraine. 

Lisichansk Oil Refinery is the main oil processing asset of TNK-BP in Ukraine. 

Currently, the refinery’s capacity for processing raw materials totals about 8.0 million 

tons a year. Raw materials are supplied to the Lisichansk Oil Refinery via the 

Samara—Lisichansk pipeline and by railway transport. The Lysychansk refinery, 

with 4.7 million tonnes processed, was Ukraine's largest refiner last year (Figure 5). 

 

 

 

 

 

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Nataliya Blyakha                                                                                       PEI Electronic Publications 7/2009 

www.tse.fi/pei 

 

 

Figure 5 

Share of the Ukrainian oil-refining plants in total amount of 

oil processed, 2008

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Odessa

19 %

Lisichansk

45 %

Kherson

0 %

Kremenchug

29 %

Drogobych

5 %

Nadvirna

2 %

 

Source: Ukrainian oil refinery sector review 

Table 6 gives an insight to the investment projects that have been implemented at 

the Lisichansk oil refinery during 2001-2006.The Russian-British company TNK-BP 

plans to invest about $ 400 million in its operational and marketing assets 

development in Ukraine during the period of 2007-2010. TNK-BP Commerce 

President Sergei Lizunov said the unit would not need to upgrade its Lysychansk 

refinery, until the end of 2010 after completing upgrades. 

Table 6 

Principal investment projects, implemented at the Lisichansk 

oil refinery 

 

2001 2002  2003 2004  2005 2006 

MTBE unit 

construction, 

$1.1 million 

Modernization of 

elemental 

production unit, 

$1.4 million 

Construction 

of “Mericat 2” 

unit, 

$8 million 

Construction 

of the bitumen 

production, 

$15 million 

Isomerizationunit 

construction, 

$20 million 

Complex of 

the 

biological 

waste water 

treatment, 

$10 million 

Source: The Chamber of Commerce in Ukraine 

                                                 

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Kherson refinery was not in operation during the period, Odessa refinery started operations 

since April. 

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