The operator of the oil transmission system of Ukraine JSC Ukrtransnafta has signed a contract with PJSC Ukrtatnafta (Kremenchuk oil refinery) to transship up to 1.2 million tonnes of oil on the ship-or-pay condition annually.

"For three years from October 1, 2019 to September 30, 2022, the customer guarantees the supply of oil in the amount of at least 1.2 million tonnes annually and at least 300,000 tonnes from October 1, 2022 through December 31, 2022," Ukrtransnafta said in a press release.

If the actual volumes of pumped crude oil to the Kremenchug refinery are lower than guaranteed, the customer, i.e. Ukrtatnafta, will pay the transportation cost for the undelivered volumes in accordance with the established tariff.

The company said that this decision will reduce the planned increase in tariffs for oil pumping. According to a draft resolution of the National Commission for Energy, Housing and Utilities Services Regulation of Ukraine (NCER), published in the middle of September, a three-stage increase in tariffs for oil transportation by Ukrtransnafta pipelines to the country's refineries was planned. In particular, the cost of transportation to the Kremenchuk refinery in two years, depending on the route, could increase by 1.9-3.5 times.

"The guaranteed volume of oil transportation, which the customer agrees to deliver, allows making lower the increase in the tariff for pumping crude oil to the Kremenchuk refinery in comparison with its projected size, which was previously based on actual pumping volumes," the company said in the press release.

As reported, Ukrtransnafta and Ukrtatnafta have already applied to the regulator with proposals for adjusting the tariff taking into account planned indicators for increasing the annual transportation volume by 41% (by 350,000 tonnes) to 1.2 million tonnes.