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Shell not to bid for role in operating Ukraine’s gas transportation system

August 20, 2014, 17:22 UTC+3 MOSCOW
Earlier this week, sources familiar with the situation said three foreign companies, including Chevron, were planning to bid for a role in managing Ukraine’s gas transportation system
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© EPA/ANDY RAIN

MOSCOW, August 20. /ITAR-TASS/. The British-Dutch company Shell will not bid for a role in operating Ukraine’s gas transportation system, a Ukrainian expert said on Wednesday.

The decision was announced by Valentin Zemlyansky, director of the energy programs at the Centre of World Economy and International Relations of the Ukrainian Academy of Sciences, during a teleconference that focused on the Ukrainian gas transit system reform.

Earlier this week, sources familiar with the situation told ITAR-TASS that three foreign companies, including Chevron, were planning to bid for a role in managing Ukraine’s gas transportation system.

The system is currently operated by Kiev. The government-owned company Naftogaz of Ukraine is planning to begin official negotiations with potential bidders shortly.

ITAR-TASS’ sources said interested companies “have many questions, both technical and financial”, and the situation may develop further within a month after the completion of all legal procedures required for enacting a gas transportation law which has yet to be adopted by the Ukrainian parliament.

On August 14, the Ukrainian parliament approved interim amendments to the law ordering gas transportation system reform, under which control over the system will be transferred to an operating company that can be controlled by the European Union, the United States or the European Energy Community.

In June, Ukraine asked the European Union and the United States to help upgrade its gas transportation system and then operate it. Kiev put the cost of the project at $3-5.3 billion, which it said would secure gas transit to Europe in the amount of 145 billion cubic metres a year until 2030.

However, Gazprom experts say that the modernization of the Ukrainian gas transportation system can cost up to $16 billion.

Ukrainian Prime Minister Arseniy Yatsenyuk also promised to seek the assistance of American and European partners in order to modernize the Ukrainian gas transportation system. He said this would “allow us to invite our European and American partners to operate and modernize the Ukrainian gas transportation system, with the Ukrainian state retaining control over the system”.

However, some deputies spoke against the transfer of the ownership rights to the gas transportation system to private companies and insisted that it be owned solely by the state.

Energy and Coal Industry Minister Yuri Prodan said that “only the state alone or the state (with no less than 51% of corporate rights) and an enterprise owned and controlled by residents of EU countries, the United States or the European Energy Community can establish and own the entity to act as the operator of underground gas storage facilities”.

Gas transit via Ukraine

The throughput capacity of the Ukrainian gas transportation is 288 billion cubic meters at the entrance and 178.5 billion cubic meters at the exit, including 142.5 billion cubic meters to European countries and 3.5 billion cubic meters to Moldova.

Ukraine’s gas transportation system consists of 72 compressor stations, 110 production shops and 1,451 gas distribution stations. The overall length of gas pipelines operated by the company is 38,600 kilometers, including 22,200 kilometers of trunk pipelines and 16,400 kilometers of extensions.

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