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Naftogaz Ukrainy signs agreement to get Chinese credits for gas-to-coal projects

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Dec. 26, 2012, 11:24 a.m. | Business — by Interfax-Ukraine

Ukraine's national oil and gas stock company Naftogaz Ukrainy has signed an agreement with China Development Bank Corporation for $3.656 billion under state guarantee for projects involving the replacement of gas with coal.
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Ukraine's national oil and gas stock company Naftogaz Ukrainy has signed an agreement with China Development Bank Corporation for $3.656 billion under state guarantee for projects involving the replacement of gas with coal, Deputy Prime Minister Yuriy Boiko's press service announced Tuesday evening.

The program envisions four investment programs with various starting and ending points, which will allow Ukraine to substantially lower its import-dependence and increase the state's energy security, and to significantly grow gross volumes of internal production and consumption with the introduction of modern technology and the building of corresponding infrastructure, the press service said.

The use at thermal-energy facilities of coal-water slurry fuel technology and the construction of plants for the gasification of coal will make it possible for Ukraine to replace around 4 billion cubic meters (bcm) of natural gas with its own coal, to provide a stable market for the sale of around 10 million tonnes of coal per year, create new jobs, and make possible savings of up to $1.5 billion.

The cost of servicing the credit line will be $2.396 billion, not counting VAT.

The credit line is open for 19 years (2012-2031) - with four years for the preparation and coordination of confirmed projects and the signing of individual credit agreements (the period of which will be 15 years).

The Energy and Coal Industry and China Development Bank Corporation signed in July a protocol of cooperation concerning replacing the consumption of natural gas with that of coal. Under the program, a number of projects are to be carried out involving the transition of Ukrainian heat-producing facilities to using coal-water slurry as fuel, and also the construction of plants for the gasification of brown and bituminous coal in Luhansk, Donetsk, and Odessa Regions using Shell technology approved by China.

The Ukrainian parliament (Verkhovna Rada) voted to extend state guarantees for the China Development Bank Corporation credit in the amount of UAH 29.5 billion for gas-coal replacement projects. The cabinet of ministers approved Naftogaz Ukrainy taking a credit from the bank of $3.656 billion back in August.

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