Kiev says tries with Russia to solve refinery feud

Kiev and Moscow have renewed efforts to solve a management dispute at Ukraine`s largest refinery, which has led to a cut in supplies from Russia`s Tatneft (TATN3.MM: Quote, Profile, Research, Stock Buzz), Energy Minister Yuri Prodan said on Tuesday, according to Reuters.

He said production at the Kremenchug refinery, controlled by government-run Ukrtatnafta, has halved in the first half of the year compared to the same period last year and, starved of Tatneft`s oil, has to buy Iraqi crude.

Prodan said the matter was discussed amongst officials when Prime Minister Yulia Tymoshenko visited Moscow on Saturday and met Russia`s Prime Minister Vladimir Putin.

"We spoke about this at the talks with the Russian side and agreed as part of the action plan of the two ministries to create a working group, which would prepare proposals on how to stabilise the work of Ukrtatnafta," Prodan said.

He did not give precise figures for production. In 2007, however, the refinery processed 5.633 million tonnes of crude against 6.328 million.

The dispute, and cuts in supplies, began last October, when a former manager reinstalled himself at the refinery, citing a court order. He has been in effective control since then.

Tatneft, which is also a partial shareholder in the refinery, filed a $1.1 billion suit in May against Ukraine in an international court. It had previously said it was missing $400 million in unpaid bills for oil supplies.

The Ukraine`s government has had a mixed reaction to the dispute. Prime Minister Yulia Tymoshenko has in turn criticised the seizure of the refinery and said Kiev would win any case against it.

Prodan on Tuesday said the situation at the refinery was unsatisfactory.

"The management of the enterprise is in no state to ensure effective work. The supplies received -- this is Iraqi oil -- are small purchases which are transported by sea, then by rail," he said.

"Unfortunately there is no oil coming via the pipeline, which is why the refinery`s indicators are unsatisfactory." (Reporting by Natalya Zinets; writing by Sabina Zawadzki).