Ukraine And Poland Sign A Memorandum Declaring Their Intention To Build A New Pipeline For Oil Exports: Agribrief

Before you think you’ve accidentally stumbled upon EURACTIV’s Green brief, worry not, you are in the right place. Because this is not your average oil pipeline, but a pipeline for sunflower seeds oil.

And no, this is not a joke – the official announcements came from both Ukrainian and Polish ministers and official institutions, and was also confirmed by the EU’s Polish Commissioner, Janusz Wojciechowski, who overlooks the agriculture portfolio in the EU Executive.

Representatives from the agriculture ministries of both countries signed the agreement, which sets out their willingness to construct a cross-border pipeline to pump vegetable oil from the Yagodyn district of Ukraine to the Polish port of Gdansk.

While the details are currently hazy, the Ukrainian agriculture ministry said it will be a ~600km pipeline, with the capacity to export up to two million tons of oil annually.

Ukraine and Poland will now create a working group to work out the technical characteristics and conditions for the construction of the pipeline and two terminals.

For Commissioner Wojciechowski, the pipeline is a “good proposal”.

“Poland is also interested in doing this. It will be very helpful for Ukraine to have a connection to the world market,” he told EURACTIV on the sidelines of an informal meeting of EU agriculture ministers in Prague on Thursday (15 September).

A pinch of common sense 

Indeed, while it may still sound like a prank by the two ministries, there are some very legitimate reasons why this initiative may have legs.

According to the EU vegetable oil association, the supplies of sunflower seed oil shipped to EU countries accounted for roughly 200,000 tonnes per month before the war.

It is estimated that between 35-45% of sunflower oil refined in the EU comes from Ukraine and member states are currently worried about the current leakage of this commodity in the European markets.

Sunflower seed yields are also expected to drop by 12% compared to the five-year average, according to the latest European forecasts.

Ukraine is among the biggest world producers of sunflower oil. According to the data from the United States Department of Agriculture (SDA), in the 2021/2022 marketing year (September-August) the country produced 4,644 million metric tons of sunflower oil.

Sunflower oil export revenues constitute a significant part of Ukraine’s overall export income.

Before the war, Ukrainian sunflower oil was exported to 107 countries of the world, and its largest consumers are located in Europe (37%), Southeast Asia (29%), and Asia (14.9%).

As of now, Ukraine is mainly exporting sunflower seeds, which take the second position after maize – 1.4 million tonnes since the beginning of the full-scale Russian invasion in February, which is 34 times more than in 2021.

This is a change of pace from before the war when fewer seeds were exported due to the high internal demand of the oil production industry.

Processed oil will bring more money to Ukraine than seeds, and the pipeline may reinforce the country as a top producer of the commodity. 

What is more, since Russia is not included in the memorandum, unlike the seaports grain deal, this initiative may even be more reliable and sustainable. It could also reinforce the political ties between Brussels and Kyiv. 

A bump of reality

But while the idea may be nice on paper, the signed document does not signal the start of construction but rather willingness to look further into the opportunity, meaning construction is likely a distant prospect.  

“The preliminary agreement provides for the appointment of a working team that will develop the technical conditions of such an investment, methods of financing and whether such a pipeline is economically viable,” Poland’s agriculture minister, Henryk Kowalczyk, explained in an interview with Polish media. 

The Polish minister added that the working team was to present the results of its analysis within a few months. 

Meanwhile, in his interview with Ukrainian media, the Ukrainian Agri minister Mykola Solskyi explained that the preparation may take even more time than the construction itself.

“The pipeline will be several hundred kilometres long, and the interests of many communities and people must be taken into account along this distance. We care more about this than the construction itself,” Solskyi said.

There is also a big question mark over the price of such an enormous undertaking.

But what is sure is that, if constructed, the pipeline would be a real innovation. After all, not so long ago, the idea of underwater train tunnels seemed to be just as weird – as is often the case with all ingenious things. 

And who knows, someday we may end up with olive oil, beer or wine exporting pipelines all across Europe.

Source: https://www.euractiv.com/section/agriculture-food/news/agrifood-brief-something-unexpected-in-the-pipeline/