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Ukraine plans talks with Western firms to operate gas pipelines

Highlights

Ukraine will shortly start negotiations with Western energy companies over creating a consortium to operate the country's natural gas pipelines and underground gas storage facilities, Naftogaz Ukrayiny, the national energy company, said Friday in a report.

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The report comes a day after Ukrainian lawmakers approved a bill that allows specifically US and European energy companies to join the consortium. The bill was designed to prevent Russian energy companies, such as Gazprom, from joining the consortium, amid fears the Russian government would seek to undermine it for political reasons.

"In the near future, Naftogaz intends to begin formal negotiations with the operators of gas networks with respect to their participation in the management of the Ukrainian gas transportation system," Naftogaz said Friday in a statement.

The deal to create the consortium can only be signed after Parliament approves it by making sure Gazprom, through its European subsidiaries, has not been involved.


The bill, which President Petro Poroshenko has yet to sign, allows European or US companies to control a 49% stake in the consortium that would operate the Ukrainian gas transportation system and underground gas storage facilities. The Ukrainian government would control the remaining 51% stake.

Russia sends more than a half of its Europe-bound gas supplies through the Ukrainian gas transportation system. Russia accounts for a quarter of Europe's gas demand.

EUROPEAN ENERGY SPACE

Ukraine's relations with Gazprom hit a new low June 16 when the Russian gas company had completely suspended supplies of gas to Ukraine, one of its biggest markets, in a dispute over gas prices.

But Gazprom has pledged to continue its gas supplies to Europe through the Ukrainian territory.

"The involvement of the leading Western companies in the management of the gas transportation system would help to complete Ukraine's integration into the European energy space," Naftogaz said. "[Under] the circumstances it is the only effective way to protect the energy interests of Ukraine."

Naftogaz recently warned the EU that there is an increasing risk of disruption of Russian gas supplies in the winter, and called for immediate talks among Brussels, Kiev and Moscow to prevent the worst-case scenario.

Ukraine transported 86.1 billion cubic meters of Russian gas to Europe, including to the EU and Moldova, in 2013, up 3.2% from 84.2 billion cu m shipped in 2012, according to the energy and coal industry ministry.

Ukraine's transit of gas from Russia to Europe fell 17.3% year on year to 5.878 billion cu m in June from 7.105 billion cu m shipped in June 2013, according to state-owned gas shipping monopoly UkrTransGaz.

Ukraine's gas pipelines are capable of moving up 120 billion cu m of gas from Russia to Europe.

Ukraine also has some of the largest underground gas storage facilities in Europe that are capable of holding 32 billion cu m/year of gas.

--Alexander Bor, newsdesk@platts.com
--Edited by Valarie Jackson, valarie.jackson@platts.com