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intends to privatize portions of Naftogaz. Naftogaz`s subsidiary
Ukrgazvydobuvannya and subordinate companies Ukrnafta and
Chornomornaftogaz produce 97% of domestic natural gas and
96% of domestic crude oil and condensate. Chornomornaftogaz
extracts oil and gas in Crimea on the Black and Azov Sea shelves,
while Ukrgazvydobuvannia and Ukrnafta operate on land.
Ukrnafta itself, a 50% state-owned company, is the largest oil
producer in Ukraine (94% of domestic oil production.) Despite the
high level of state control, there is a number of successfully
operating international companies in oil and gas extraction. They
are mostly working in joint ventures or under joint activity
agreements with Ukrnafta or with Naftogaz`s subsidiaries. The
Law on Production Sharing Agreements and the Oil & Gas Law
were intended to simplify the procedure of obtaining licenses for
oil & gas exploration and extraction and provide additional
guaranties for the investors.

Oil & Gas Storage and Transportation
Ukraine has approximately 35,600 kilometers of gas
pipelines, all operated by Naftogaz. The yearly transportation
capacity of the system is 290 billion cubic meters. The
transportation capacity toward South Russia, Belarus, Moldova,
Romania, Hungary, Slovakia, and Poland is approximately 170
billion cubic meters annually. Naftogaz operates underground gas
storage reservoirs with a total capacity of 32 billion cubic meters.
Ukrtransnafta (includes Druzhba Pipeline company and
Prydniprovsky Main Pipeline company) transports about 68
million tons of crude oil annually, operating at about 60%
capacity. Druzhba Pipeline delivers crude oil to two refineries in
Western Ukraine and transports Russian oil to Europe. The
Prydniprovsky Main Pipeline delivers crude oil to the refineries in
the central, eastern and southern Ukraine, as well as Russian oil
exports to the terminals at Odessa, Ukraine and Novorossiysk
(Russia.)
There are three major oil terminals in Ukraine: Odessa,
Yuzhny and Feodosia. The Odessa oil terminal, which has an
annual capacity of 20 million tons of crude oil, accounts for most

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