Naftogaz Unbundling Due to Start 2020

Naftogaz Ukrainy will not start the unbundling process until it has been finalised at the beginning of 2020, so after the existing transit contract with Gazprom expires, it said July 24.

The supervisory boards of Naftogaz and the future transmission system operator Magistralnye Gazoprovody Ukrainy (MGU) agreed that only then could they proceed towards "a full and transparent unbundling of Ukraine’s gas transmission function."

Russian gas export monopoly Gazprom has said it wants to terminate the contract but since then, the ultimate controller of Gazprom, the Russian president Vladimir Putin, has talked about extending the contract and continuing to send Russian gas into Europe, even after Nord Stream 2 and TurkStream become operational.

Naftogaz has already hired a number of consultants to work out the process, and the value of the assets that are to be unbundled, taking into account their age.

The chair of Naftogaz’ supervisory board Clare Spottiswoode said: “This is a critical milestone that will ensure Ukraine is in compliance with EU regulations while guaranteeing Ukraine’s energy security and economic prosperity. We would like to thank [Ukraine's] prime minister Groysman for the government’s leadership as well as US Assistant Secretary of State Frank Fannon for his help and support during his current visit to Kyiv, and the rest of the international community for their support and guidance."

As the former head of the British energy regulator Ofgem, Spottiswoode oversaw in the mid-1990s the introduction of third-party access to the gas grid in the UK and took a lot of flak from the pipeline operator Transco when the regulator slashed its asset value and hence its allowable earnings. But the decision to unbundle transmission from trade and supply was the parent company BG's, not the regulator's.