Ukraine has offered Azerbaijan a share in its refinery business in exchange for Azeri crude, Azeri state oil firm SOCAR said on Tuesday, according to Reuters.
If it takes place, the deal would mark the first big energy cooperation deal between the two ex-Soviet states.
"Ukraine has offered us various options involving its refineries including buying shares and creating a joint venture," Vice President of SOCAR Elshad Nasirov told Reuters.
"But so far we have different points of view on refinery locations, possible investment terms, and the prospects for oil product exports," he said, adding that the talks were far from over.
Discussion between the two countries has intensified over recent months in what analysts say may lead to the reversing of the Odessa-Brody oil pipeline, which pumps Russian crude to the Black Sea instead of shipping it in the initially designed direction from the Black Sea to Poland.
Warsaw and Kiev, both heavily dependent on Russian oil, have discussed the idea for several years but have failed to persuade Caspian Sea producers to ship crude via the route.
Ukraine and Azerbaijan are expected to further discuss potential cooperation on Tuesday and Wednesday, during a state visit by Ukraine`s Energy Ministry to the Azeri capital Baku and later at an energy summit in Kiev at the end of the month.
SOCAR also said it is considering Ukraine`s proposal to jointly build a Ukrainian refinery along with Poland`s largest fuel group PKN Orlen.
"It`s just an idea we`ve been floating around, we haven`t looked at its technical and economical viability," Nasirov said.
Ukraine has six refineries which process 51 million tonnes of oil per year, although they are running at 35-40 percent capacity. Three out of them are controlled by Russian oil firms.
Azerbaijan`s oil is produced by SOCAR and a BP-led group, which operates the Azeri-Chirag-Guneshli group of fields in the Caspian Sea, which has reserves of 5.6 billion barrels of oil.
Oil output is expected to exceed one million barrels per day later this year with the bulk of exports going mainly via the Baku-Ceyhan pipeline to Turkey.