A delegation of the European Commission in late April visited Kyiv to discuss the reform plan of national joint-stock company Naftogaz Ukrainy, efforts to fully integrate with the European energy market and the start of the accumulation of natural gas stocks at Ukrainian underground storage facilities, the press service of the holding reported on May 7.
The representatives of the commission said that the accumulation of natural gas stocks at Ukrainian underground storage facilities is an important and urgent issue to safeguard stable gas supplies in both Ukraine and the EU next winter.
The EU representatives proposed initiating a trilateral discussion between Naftogaz, Gazprom and EU representatives to find a solution acceptable to all parties, including prompt repayment of Naftogaz debt and an urgent start of pumping gas into Ukrainian underground storages at a fair market price.
At the meeting it was said that if Ukraine implements key reforms to bring its energy market up to the EU standards, the industry will become highly attractive for investment as Ukraine has abundant undeveloped resources of conventional gas, in addition to its considerable shale gas potential. The EC is willing to actively promote such investments from European companies, providing essential informational support as well as financial guarantees.
Necessary reforms should include, first of all, an unbundling of key gas market functions, namely, gas supply and transportation. Secondly, Ukrainian internal prices should be lifted to a reasonable market level to make such an investment financially justified. Thirdly, Naftogaz should introduce long-needed measures to raise the transparency of the company and its subsidiaries and establish international corporate governance standards.
Naftogaz Ukrainy Board Chairman Andriy Kobolev said that these steps perfectly match the reform plan the company is developing jointly with a group of international financial institutions and local experts.
He said that unbundling of gas market functions will make sense only after Ukraine achieves significant diversification of its gas supplies. One of the key sources of such diversification is the reverse flow from Slovakia which can provide transit capacity of up to 30 billion cubic meters but the central European state is reluctant to do this because of certain undisclosed legal limitations imposed by OSJC Gazprom.
The representatives of the commission said that it is essential that gas supplies are made available to Ukraine via Slovakia. There is a need for signing a direct interconnection agreement between the Slovak transit system operator Eustream and its Ukrainian counterparty Ukrtransgaz in accordance with the EU energy regulations.
The press service said that according to Commission analysis the bilateral agreements concluded by Russia with Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia and Austria are in breach of EU law. The Commission will only accept the operation of this pipeline if it is managed in accordance with the 3rd Energy Package, which includes a clear separation of transit and shipping functions and third party access, the representatives of the commission said.
