Ukraine Approves Law on Unbundling
Ukraine’s cabinet of ministers has approved the law on unbundling gas transportation and storage from Naftogaz Ukrainy, at a difficult time for the country's gas industry.
State-owned gas merchant Naftogaz welcomed the formal launch of the process of unbundling the gas transmission function from Naftogaz in line with the EU's Third Energy Package.
The approved action plan is a result of a compromise reached after a lasting discussion with government authorities, the Energy Community Secretariat (ECS), representatives of the World Bank, and the European Bank of Reconstruction and Development.
This decision will accelerate Ukraine’s full integration into the pan-European energy system, said Naftogaz CEO Andriy Kobolev July 4.
However, while Ukraine is planning to import more gas from the west and to develop its own gas production, for the moment Russia is the principle user of the transport system, and its plan is to cut flows to a trickle from 2019 when Nord Stream 2 is due on line. That could divert some 55bn m³/year of Russian gas from Ukraine, and the financial loss for Ukraine has been put at close to $2bn/year.
Naftogaz put the transit fees up sharply until 2019, making Nord Stream 2 even cheaper by comparison, but said this was only to bring forward the amortisation of the pipelines, which were built by the Russian gas ministry in Soviet times. After 2019, it said, the tariffs would fall.
According to the approved plan, two new joint stock companies will be created, one to manage the high-pressure pipelines and the other to manage the underground storage facilities. They will take over the respective assets of Ukrtransgaz, the Ukrainian transmission system operator (TSO). Their shares will be 100% owned by the state of Ukraine.
The newly created operating companies will be governed in line with the OECD Guidelines on Corporate Governance of State-Owned Enterprises.
The necessary legal instruments and actions are to be executed during 2016-2017.
The proposed plan suggests that gas transmission assets will be transferred to the new TSO only after the final arbitration award on the claims between Naftogaz and Gazprom considered by the Arbitration Institute of the Stockholm Chamber of Commerce. Both sides are suing each other over the gas price, transit fees and transit volumes.
It is envisaged that Ukrtransgaz will stay under Naftogaz control until the divestment of its non-core assets and resolution of all outstanding matters of dispute related to the company.
The plan also requires that underground gas storage assets are transferred from Ukrtransgaz to the new operator not earlier than an in-depth economic and technical analysis is conducted, aiming to work out the most effective model for their use and management.
William Powell | www.naturalgaseurope.com