Andriy Kobolyev: Within four months Ukraine has to introduce changes in energy sector not made in 10 previous years

Andriy Kobolyev: Within four months Ukraine has to introduce changes in energy sector not made in 10 previous years
July 04, 2014.

Kyiv, 4 July 2014 – Gas supply from Russia to Ukraine is currently shut off, the only supply source for now is from the European direction, it puts new demands on the country. First of all we’re talking about establishing civilized market rules as well as saving energy. Andriy Kobolev, “Naftogaz of Ukraine” JSC Head of board, said at a briefing in the Ukraine Crisis Media Center. “We now have to decrease our gas consumption by 6 billion cubic meters that compared to the last heating season constitutes 20% of the general consumption. Within four months we actually have to do what has not been done for 10 years until now. Energy saving and at the same time managing energy supply services are in the agenda, this incudes energy efficiency, heat trace and generation issues – setting up alternative sources and increase of own production,” he said.

According to Mr. Kobolyev Ukraine has actually got huge potential for resource saving. In order to have this potential applied it is important to introduce economic incentives, state will and that of the people is important. “Saving potential in municipal sphere in particular is not less than 4 billion cubic meters a year. Surely it is impossible to achieve it in one year but our first steps could bring us closer to our target figures,” Andriy Kobolyev is convinced.

Actual economic analysis in private sector shows that gas consumption is more cost efficient than coal, that’s why it’s impossible to expect considerable changes with no actual economic incentives. The mechanism in place de-facto foresees subsidizing the difference between the consumer price and the gas import price. Establishing common wholesale gas price for all market players can become a powerful instrument. “It would be right to stick to the average import price of USD 360-370 per thousand cubic meters. Local gas cannot be several times cheaper because such a scenario stimulates the import of energy resources. Current price doesn’t allow not only to increase extraction, but even to cover expense for renovation of operational wells. There is no alternative way out,” said “Naftogaz of Ukraine” JSC Head of board. Subsidies and discounts have been introduced to protect certain social groups from considerable price increase. At the same time companies generating energy will lose their motivation to manipulate the volumes of gas between energy and heat.

If talking the language of figures an average household using a gas stove will be paying not UAH 31, but UAH 150 a month. “Of course it’s considerable increase, but we have to start the changes from ourselves and understand that gas expenses are everyone’s needs and are not less important than expenses, say, on mobile connection, for which average Ukrainian’s monthly bill is higher,” said Mr. Kobolev.

“It is important to take into consideration one more element of social injustice – households buying gas in cylinders pay UAH 270 already today. Those unpopular and unpleasant changes are irreversible for us and key in gaining Ukraine’s energy independence.”

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