The year 2022 proved that the independence of the energy system is one of the key factors of the state's security. We have spoken with Volodymyr Petrenko, the founder and owner of the UPG group of companies, about how Ukraine managed to make a shift from Russian and Belarusian fuel suppliers to European ones, and what will happen to gas station prices in the near future.
founder and owner of the UPG group of companies
Despite the current blackouts, most Ukrainians experienced a real energy crisis last spring, when queues at gas stations were measured in kilometers, and unfair dealers started selling low-quality fuel at artificially high prices.
All this happened because of missile attacks by the Russian invaders on oil refineries operating in Ukraine. As a result, the industry was completely frozen at the beginning of summer 2022.
However, a much more serious problem was the dependence of the Ukrainian fuel market on imports from Russia and Belarus. All gas station chains, without exception, were forced to look for new suppliers as soon as possible and reorganize their logistics.
Thus, in summer the UPG group of companies purchased a marine terminal for transshipment and storage of oil products in Szczecin, Poland. Therefore, UPG created the conditions for an uninterrupted supply of high-quality European fuel to Ukraine at the lowest prices on the market.
Volodymyr Petrenko, the founder and owner of the UPG group of companies, told us about the factors that enabled this step, and what will happen to the fuel market of Ukraine in 2023.
What are the milestones in the development of the UPG group of companies?
I have been in the oil industry since 2003. At first, I was engaged in woodworking and exchanging the necessary fuel for wood. Back then did we realize that we could earn more, and not just buy fuel from intermediaries with small fuel trucks.
In 2003, we established the company "Ukrpatelsystem", which began to perform all legal operations. In just two years, we bought our first small oil depot in Korosten, having taken a bank loan for this. This was our first big step in the oil business.
In 2008, we rented our first gas station near Zhytomyr (the village of Sinhury). Later that same year, we opened another station in Rokytne, and we kept developing.
Leasing a large oil depot in Korosten in 2011 was a strong start for us on the oil market. We bought the resource from large traders, in particular from OKKO and WOG brands, which imported the fuel from Belarus.
With the acquisition of our second oil depot, we concluded direct supply contracts. At first it was 1,000-1,200 tons per month. Over time we began to expand and developed the company to its current scale.
What role did your family play in the formation of the company and what is their contribution today?
M y family and I remain the sole owners of the UPG group of companies since its founding. There are no other founders or owners, and today it's just me, my son, wife, mother, and sister.
In fact, this is a family business, and family is the most precious thing for me. My eldest son is now 26 years old, and he works side by side with me. Two more sons are growing up, and I'm sure they will soon join the business. So, this is definitely something I do for them and for their future.
Today, my son fully controls the supply of light petroleum products to Ukraine, and my wife performs the duties of an auditor, and is responsible for all financial flows and expenses of the company. I am, so to say, the generator and driver of all the ideas. Even though the war continues, we stay in Ukraine, we have not gone anywhere. I'm Ukrainian. This is where my business and my people are. Now we are developing, building new gas stations, and we believe in our victory and a bright future for our country, so we keep working.
In general, the UPG "family" has more than 4,000 employees, the vast majority of whom work in Ukraine. Last year we paid UAH 3.5 billion in taxes, and I believe that this is a good investment in the development of the state. We make our contribution to the defense of the country by fulfilling all obligations to it and helping the army.
When the war ends, we will give a detailed answer to the question about what we did to win. I am convinced that now is not the time to hype our efforts and show off.
Who was the key supplier of fuel to the UPG chain before the war and how did the situation change after February 24, 2022?
W hen the war started, it felt like I was back in 2003 again, because we had to basically build the business from the scratch once more. The matter is that our main supplier was the Mozyr Oil Refinery [Belarus - ed.], we worked only with them and literally got hooked on this.
On February 24, everything ended, and I realized that the company was left with nothing. While other large chains supplied fuel by sea, traded with Lithuanian, Polish or Hungarian companies, we worked with only one supplier.
For the first two weeks, I could not figure out what to do, but one day we got into the car with my son and went to Europe to look for new suppliers. As a result, we started buying fuel in Romania and Greece, receiving the first shipments through the Romanian port of Constanta.
Having one of the largest fleets in Ukraine (almost 400 fuel trucks), we immediately started importing fuel, to ensure the operation of our gas stations throughout the country. Now we are picking up steam, our fleet has increased to 450 fuel trucks, we have purchased European railway cisterns, and we continue to develop our own logistics network.
We buy exclusively European fuel, from the following manufacturers: Royal Dutch Shell, Total Energies SE, Neste Oyj, Hellenic Petroleum, Rompetrol and others.
Belarus threatened to stop supplying fuel to Ukraine just days before the war. Did you get prepared for this? Are you planning to resume cooperation with Belarusians in the future?
R ealistically, we didn't realize that this could happen. On the eve of the full-scale offensive, we transferred a lot of payments to them, about 4.8 million euros, and no one will ever return this money.
Looking back, I don't understand why I worked with them at all. The conditions and opportunities that exist in Europe and that we are using now are much better than those that we received from the Belarusians, even from the point of view of pricing policy.
Now they say that we were allegedly the "general partner" of the Belarusians. But this is not the case: in fact, other Ukrainian companies had identical contracts with them, and sometimes even better ones. As it turned out, the large traders even received a discount on fuel from them in the amount of $2 to $5. Later I understood that we were fooled.
The only difference was the license agreements for the use of the BNK [Belarusian Oil Company - ed.] brand at 5 of our gas stations. These contracts guaranteed us an uninterrupted supply of oil products under any circumstances. Of course, our competitors did not like that we had such a resource.
But considering what had happened, I think the next two or three generations of Ukrainians will definitely not do any business with Belarusians.
Tell us about the purchase of a marine terminal in Poland by the UPG group of companies: how was it and what role did it play in the supply of the fuel to the Ukrainian market?
L ast year, we purchased a large terminal in Poland, which today guarantees an uninterrupted supply of fuel to Ukraine.
We are ready to move forward: we are open to the Polish market and Polish partners who want to come to our terminal. This terminal is very large 一 it can load up to 250,000 tons of oil products. Therefore, there are enough resources, and we will be able to cooperate with everyone who is willing.
Before the start of the full-scale invasion, Ukraine received 35% of its light oil products from Belarus and another 45% from Russia. Now it seems unimaginable. Therefore, when they start accusing me that the UPG chain used to sell Belarusian fuel, I always emphasize that almost the entire country was completely dependent on imports from Russia and Belarus. However, since the beginning of the aggression in 2014 and the occupation of the Autonomous Republic of Crimea and certain territories of the Donetsk and Luhansk regions, the company has neither purchased nor sold any single ton of Russian oil products, and since February 24, 2022, not a single ton of Belarusian oil products.
The idea of buying a new terminal in Poland imposed large financial risks and threats for the company. We went for it, and in the end, we managed to establish a stable and independent fuel supply network for Ukraine.
The refinery in Belarus is located 80 km from our border, and before the war we could deliver fuel from there in less than a day. Currently, the process of buying and supplying fuel to the end consumer lasts more than a month. But thanks to our own terminal, our own cisterns, and our own logistics, we are constantly shortening this period by restocking in advance.
Today, we are stocked up with all types of fuel, including branded arctic diesel, upg100 gasoline, and upg95 gasoline with an octane number up to 97 units. Therefore, UPG clients always have a choice. It is also possible thanks to our Polish terminal, which can load approximately 250,000 tons of oil products per month. In the future, this indicator can be increased to 450 thousand tons.
Many chains experiences crisis in 2022, how did you survive?
U PG's competitive advantage has always been its own logistics. We started investing into it earlier and purchased our fleet before the full-scale invasion, and we continue to add new vehicles today.
This allowed us to increase volumes constantly, replenish the fleet with new fuel trucks every month, and buy additional railway wagons. We move forward and analyze every day what we lack in logistics.
Thanks to this, we achieved remarkable success and built a reliable basis for the supply of high-quality European fuel to Ukraine. I understand that our competitors don't like our prices, but we have no moral right to increase fuel cost, which has already increased enormously over the past year.
With the acquisition of the terminal, we became completely independent from the specifics and conditions of imports, internal trade of European countries and the implementation of their state programs, such as sowing campaign, etc.
We can't wait. We need to ensure an uninterrupted fuel supply to support all our customers, including critical infrastructure, farmers, logistics workers, and the average car owners who also need fuel every day.
What are UPG's plans for the near future?
T oday, we are number two in terms of the volume of supplies of light petroleum products to Ukraine. But very soon we will become number one, because we have a powerful potential, which we had been developing throughout the previous year.
We are very grateful to our government for taking timely strategic decisions and supporting the entire oil industry. We were supported by all the banks, so we are grateful to our state for the trust, and we thank everyone who did not allow this extremely important industry to collapse.
The oil market is a constant stress. But today the panic is gone. We know our enemy very well. It is, among all, an energy terrorist, and it is good that Europe and the whole civilized world have realized this. Therefore, not only Ukraine, but also Europe experienced the transformation and restructuring of its logistics chains.
Due to this, today's prices have started to decrease, and I am sure that large-scale shocks in the oil market are very unlikely. We have endured this, survived, and will live on.
Next, we are waiting for the adjustment of all supplies and the improvement of economy in general. Now the most important thing is defeating the enemy as soon as possible - to prevent our people from dying, and to make our defenders return home alive.