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Ukraine's parliament rejects government’s bill on gas transportation system reform

July 25, 2014, 9:21 UTC+3 KIEV
July 4, the parliament gave an overall approval to the bill, which allows US and European companies to run the system
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© ITAR-TASS/ Maxim Nikitin

KIEV, July 25. /ITAR-TASS/. Ukraine’s Verkhovna Rada (parliament) on Thursday rejected the government’s gas transportation reform bill.

July 4, the parliament gave an overall approval to the bill, which allows US and European companies to run the system. According to the draft law, 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 that will act as the operator of the system.

Parliament-appointed Prime Minister Arseniy Yatsenyuk said the state would retain full control of the system and would hold controlling interest in its operator.

Naftogaz CEO Andrei Kobolev said Russian companies or individuals would not be able to acquire shares in the Ukrainian gas transportation system. Instead, Kiev is planning to lease the system to European companies so that “they would guarantee the transit of gas “.

“The draft contains a clear criterion for compliance with the Third Energy Package, which Gazprom does not conform to and is even trying to contest. We are talking about major European companies which manage gas transportation systems and can bring their expertise and investment and, most importantly, guarantee the transit of gas across Ukraine,” Kobolev said.

Kobolev said selling the gas transportation system to Gazprom would be unacceptable.

“This is an unacceptable scenario for settling the conflict,” he said, referring to the dispute with Gazprom over gas supplies and the price of gas for Ukraine.


Gazprom not interested in acquiring Ukrainian gas transportation system

However, Gazprom CEO Alexei Miller said his company had “no interest” in acquiring the Ukrainian gas transit system. “That ship has sailed and it seems it did so yesterday,” he said.

“It belongs to no one. There is no owner. The gas transportation system does not belong to Naftogaz of Ukraine but it belongs to the Ukrainian government. And before modernization or cooperation can be discussed with anyone, it [the system] should appear on the books of some business entity. Property and legal issues have to be settled first,” Miller said.

He believes it necessary to “change about a dozen Ukrainian laws before doing something with the gas transportation system” the value of which he said “is not very high”.


The cost of the reform

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 meters a year until 2030.

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

The throughput capacity of the Ukrainian gas transportation is 288 billion cubic meters system 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. Natural gas transit through Ukraine to Europe and CIS countries in 2011 increased by 5.7% year on year to 104,197,067,000 cubic meters, including to Western Europe by 5.9% to 101,098,013,000 cubic meters. However, it decreased by 2.4% to 3,099,054,000 cubic meters to CIS countries.

Ukraine’s gas transportation system consists of 72 compressor stations, 110 production facilities 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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