Ukraine is looking to bring the World Bank on board to help finance the modernization of the Urengoi-Pomary-Uzhgorod trunk gas pipeline, the overall price tag on which is an estimated $1.024 billion.
The Ukrainian Energy and Coal Industry Ministry press service said that this was discussed during a meeting involving Energy and Coal Industry Minister Eduard Stavytsky and World Bank Country Director for Ukraine, Belarus, and Moldavia Qimiao Fan in Kyiv on Tuesday.
Upgrading the pipeline involves the reconstruction of the section in Ukraine. According to the ministry, investment in the first phase of this is estimated at $519 million. Plans call for securing $154 million each from the European Bank for Reconstruction and Development (EBRD) and European Investment Bank, and another $211 million will come out of national Ukrainian oil and gas company Naftogaz Ukrainy’s own coffers. The cost of subsequent phases will run to about $505 million.
The ministry press service said that the allocation of funds by the World Bank, EBRD, and EIB for the pipeline’s modernization will be an important political signal that international financial institutions back the need to reconstruct Ukraine’s gas-transport system as a vital element of ensuring European energy security.
Early this month, Ukrainian Foreign Minister Leonid Kozhara said the European Union would provide a EUR 308 million credit for the overhaul of the Ukrainian section of the Urengoi-Pomary-Uzhgorod trunk gas pipeline. “Last week in Brussels we discussed the question of lending for the reconstruction of the gas pipeline. The Europeans agreed to speed up the extension of a credit for these goals in the amount of EUR 308 million,” Kozhara said at the time.
The Ukrainian government, European Commission, EBRD EIB, and World Bank signed a joint declaration on the outcome of an international donors conference concerning the modernization of Ukraine’s gas-transport system. This document stipulates EU readiness to lend a hand in the modernization of the system as a key component for supplying Europe with gas and envisions increasing its throughput capacity by 60 billion cubic meters (bcm) to 200 bcm per year.
Later, tentative agreements were reached concerning the extension by international banks to Ukraine of $1.5-$2 billion for the system’s modernization, but this was delayed due to Kyiv dragging out gas sector reforms.
The Ukrainian section of the Urengoi-Pomary-Uzhgorod gas pipeline is 1,160 kilometers long and 1,420 millimeters in diameter.
Ukraine’s gas-transport system has throughput capacity of 288 billion cubic meters (bcm) at intake and 178.5 bcm at outtake, including 142.5 bcm to countries in Europe and 3.5 bcm to Moldova.
Natural gas transport through Ukraine to countries in Europe and the CIS last year was down 19.1% from the year before at 84.261 bcm.
