Ukraine’s Energy Ministry to de-politicize natural gas sector in a bid for major energy reform

Ukraine’s Energy Ministry to de-politicize natural gas sector in a bid for major energy reform
July 29, 2015.

Kyiv, 29 July 2015. Ukraine has committed itself to reforming and implementing its energy legislation in line with the European standards, which will provide the country with ample exposure to the international community, especially the European Union. This was stated by Michael Bno-Ayriyan, Head of the European Integration Department at MECI at a press briefing at Ukrainian Media Crisis Centre in which he presented the results of the Ministry’s activities for the first half of 2015.

According to Bno-Ayriyan, such results included increasing the gas reserve by 10 times, reducing gas supplies from Russia to 10 billion cubic meters, and receiving foreign aid exceeding 800 million euros. Bno-Ayriyan says that gas issue de-politicization is one of the most critical focus areas for the Ministry. “We managed to get the ‘winter gas package’ discount as well as a discount for the second quarter of 2015, which, among other things, resulted from the fact that we have secured diversified natural gas supplies,” Bno-Ayriyan said.

In addition, he noted that the gas dispute resolution process has proceeded from a ‘Ukraine/Russia dialog’ to a ‘Ukraine/EU/Russia dimension,’ adding that the gas sector transparency has been improved within this trilateral approach. “If we do not receive natural gas supplies from our partner for whatever reason, this now not only concerns our relations, but also concerns Ukraine/Russia/EU relations. Thus, our relations have become smoother, the level of politicization of the issue has been lowered, and now we are able to hold a dialogue in a more or less viable and constructive way,” Bno-Ayriyan stated.

In addition, the volume of gas reserves has increased by 5 billion cubic meters over the past six months. The government signed off on the Gas Sector Reformation Plan and approved a plan for implementing some EU regulations related to the energy sector. In addition, the new law on the natural gas market has been adopted and the draft law on the electricity market has been prepared, according to the Ministry’s representative.

Regarding official visits to other countries, Bno-Ayriyan emphasized the visit of the Energy Minister to Turkmenistan. “There, we expressed interest in resuming Turkmen gas supplies to Ukraine, in spite of the face that gas cannot physically pass through the transit countries, but we have nonetheless made a political statement that we are interested in such cooperation,” Bno-Ayriyan said.

Bno-Ayriyana continued by stating that cooperation with international financial organizations has increased. In particular, Ukraine has entered into a $378 million Clean Technology Loan Agreement with the World Bank. The Bank also provided a grant for the implementation of the Extractive Industry Transparency Initiative for $300,000. Ukraine also entered into a 300 million euro loan agreement with the European Bank for Reconstruction and Development to upgrade the Urengoy-Pomary-Uzhgorod pipeline. In addition, Bno-Ayriyan added that the German KFW Bank is granting Ukraine loans for the financing of infrastructure reconstruction and modernization projects in Eastern Ukraine to the tune of 200 million euros.

In cooperation with the EU, the Ministry of Energy and Coal Industry has begun implementing the EU’s Third Energy Package, proposing to the EU a ‘reset’ of their energy relations and asking it enter into a new Memorandum of Understanding (MOU). “Tentative pre-approval has been obtained. We believe that we will develop a draft MOU and hopefully sign it by the end of this year,” Bno-Ayriyan said, noting that Ukraine is also expanding cooperation with Japan.

Bno-Ayriyan also specified tasks that have not been fully completed, which include striking a deal on the ‘summer gas package,’ holding the ministerial meeting of the Visegrad Four plus Ukraine focused on energy issues, launching the ‘great reversal’ project in cooperation with European countries – in particular with Slovakia – and addressing the issue of financing energy procurement for fall and winter.

Among the main tasks of Ukraine’s Energy Ministry to be completed by late 2015, Bno-Ayriyan named the extension of a deal on the ‘winter gas package’ with Russia, the essential procurement of energy for the heating season, the development of an Emergency Action Plan for the sector and the introduction of a procedure for securing immediate responses to challenging issues connected to foreign investors’ operations in the Ukrainian energy sector.

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