You're reading: Cost of modernizing key elements of Ukraine’s gas transport system put at $5.3 billion

About $5.3 billion of investment may be needed to overhaul and modernize priority elements of Ukraine's gas transportation system, the deputy chief executive of national oil and gas company Naftogaz Ukrainy, Vadym Chuprun said on Thursday.

This money would be spent over a period of seven years, but timetables might be shortened in the course of project implementation, Chuprun said at the Energy in Ukrainian Industry exhibition in Kyiv.

He said negotiations are being held with a number of international companies concerning financing and the conditions for their participation in the project. "A number of proposals for cooperation have already been received from international companies. As soon as the preparation of the necessary documents is completed, all interested companies will be able to take part in the implementation of the project on a tender basis," Chuprun said.

He said banks would decide on the mechanism of financing once consulting firm Mott MacDonald submits its report on the project to modernize the gas transportation system.

"I think that at the end of October we will accept the final report and begin implementing this project more specifically," Chuprun said.

Ukraine officially announced the start of the modernization of its gas transportation system in summer 2011. The first phase involving international financial organizations will be work on the modernization of the Urengoi-Pomary-Uzhgorod gas pipeline. The first phase of the modernization of Ukraine’s section of this pipeline is expected to take three years and cost $538.87 million, including $230.87 million from Naftogaz and $308 million in loans ($154 million each from the EBRD and EIB).

The Energy and Coal Industry Ministry in July 2010 estimated the cost of modernizing the country’s gas transportation system at $6.5 billion.

The capacity of Ukraine’s gas transportation system is 288 billion cubic meters upstream and 178.5 bcm downstream. Transshipments of natural gas through Ukraine to other CIS countries and Europe rose 2.9% to 98.602 bcm in 2010.