Since Russia’s Gazprom cut the gas supplies to Ukraine on June 16, government has been intensively looking for the energy model which would be based on full independence from Russian blue fuel. Energy experts thinks Ukraine may succeed in this.
Several experts at the Adam Smith Conferences’ Ukrainian Energy Forum on June 26 gave an upper figure of 15 billion cubic meters of gas that Ukraine could save within 5 years if serious energy efficiency measures would be put into place. Add this to the 20+ billion cubic meters
of domestic production and another 14 billion that Ukrainian officials believe can come through a reverse flow from
the European Union, and the country could wean itself off Russian gas in the medium term. Ukraine is expected to consume 47 billion cubic meters of gas this year.
Prime Minister Arseniy Yatsenyuk would be happy to hear this as he gave several
orders to the Cabinet to prepare for the heating season without any reliance on
Russian supplies.
Today Ukraine consumes three times more gas per unit of gross domestic
product than the EU. Moreover, the stake of gas in primary industry in Europe
is 20 percent, for Ukraine that number rises to 40 percent.
Ukraine has already reduced gas consumption from 75 billion cubic meters
in 2006 to 50 billion in 2013.
The country was enjoying cheap prices for the Russian gas through the 1990’s
and early 2000’s, which was seen as a reward for not taking serious steps towards
closer integration with the EU. This led to excessive gas consumption.
The Russian gas giant Gazprom wants Ukraine to pay $385 per thousand cubic meters, and on its terms. Ukraine’s Naftogaz has said ‘no’ and is demanding not only a lower price, but one tied to a transparent pricing scheme. Now, everything depends on the ruling of a Stockholm arbitration
court, where Naftogaz and Gazprom are suing each other over the validity of the
2009 gas contract and whether the pricing scheme therein is legitimate.
Kyiv-based economist Oleksandr Paskhaver agrees that it’s possible to
eliminate Russia as a gas provider in less than five years. Political will is
the only precondition for this.
Meanwhile, Oleksiy Timofeyev, chief executive officer for Smart Holding
who has a deep expertise in energy issues, doesn’t think boosting the home gas
extraction is an easy task as Ukraine’s gas reserves were substantially exhausted
back in the Soviet times.
He also thinks Ukraine’s first President Leonid Kravchuk made a big
strategic mistake when allowed Gazprom to sell its gas to the European counties
on the Ukraine’s western border back in the early 1990’s. Shifting that spot to
the eastern border – which would mean that the EU, not Russia, would pay for
using the Ukrainian gas transportation system – could be an effective measure.
Moreover, such a deal could ease Ukraine’s access to the reverse flows
from Hungary, Poland and Slovakia as Gazprom claims its contracts with these
countries do not imply supplying the gas for Ukraine. Amount of gas received
from the reverse could rise to 30 billion cubic meters, once the contracts with
Gazprom are sorted out.
However, at the moment Europe and Ukraine are building a ‘small reverse’
pipeline between Slovakia and Ukraine to transit 8-10 billion cubic meters of
gas, which will be completed by September, according to Yuriy Vitrenko, advisor
to the CEO of Naftogaz Andriy Kobolev.
Contract with Gazprom is very profitable for Slovakia, that’s why it is
not too flexible in negotiations with Ukraine regarding the reverse gas
supplies, said Mikhail Korchemkin, director of U.S.-based consulting firm East
European Gas Analysis, in an interview with the Radio Liberty.
Shell and Chevron, global energy giants who are working on a number of
shale gas projects in Ukraine, admit that reforming the regulatory side of the
energy equation is essential if Ukraine wants to develop its resources
properly.
Kyiv Post business journalist Evan Ostryzniuk
can be reached at [email protected].
