Volodymyr Demchyshyn: diversification of gas supply and preparation of a number of draft laws laying foundation for demonopolization and liberation of all the markets in energy industry are main achievements of the Ministry of Energy


Kyiv, November 9, 2015. The main achievements of the Ministry of Fuel, Energy and Coal Industry are diversification of gas supply, preparation of a number of draft laws to improve the competitive environment in energy industry markets, facilitation of subsidies for public utility services for disadvantaged social groups as well as developing concepts of reforms in coal industry and nuclear industry sector. “The Ministry is working in three main directions: operational work, developing laws and regulations and developing programs and concepts in various segments of the industry,” said the Minister of Energy and Coal Industry of Ukraine Volodymyr Demchyshyn at a press briefing in Ukraine Crisis Media Center. Experts of the Ministry of Energy developed a number of draft laws supporting efficient competitive environment in energy markets, for instance, law No.329-VIII ‘On the natural gas market’, passed in May 2015. Subsidiary legislation has been finalized. Unfortunately, some documents have not been approved so far,” said Demchyshyn.

“We do hope the Verkhovna Rada will review and support them within the next week. The changes we suggest are mostly technical, but they will eliminate contradictions between the effective legislation and new laws on the gas market.” According to the minister, it is important that the Verkhovna Rada review draft law No.3074 making changes to the Customs Code and draft law No.3073 envisaging amendments to the Internal Revenue Code this week. Draft law ‘On electric power market’ has already been developed. Moreover, the Ministry of Energy signed a draft law ‘On National Commission conducting state regulation in the spheres of energy industry and communal services’ with the Cabinet of Ministers and submitted it to the Verkhovna Rada. “These are three fundamental laws allowing me to claim we are laying foundations for demonopolization and liberalization of all the markets [in the energy sector],” emphasized the minister. The fourth draft law, ‘On state support of coal industry’, envisages new price formation principles and provision of state support of coal industry for efficient restructuring in this sector, as well as providing self-repayment of gas extraction and reduction of all the state subsidies to minimum by 2020. Dynamics of this draft law is slightly lower in comparison.

“We plan to analyze various price formation indexes to try and use them for price formation in Ukraine,” said Demchyshyn. Verkhovna Rada also passed the law No.521-VIII ‘On making changes to some legal acts of Ukraine on securing transparency in extractive sector’. Preparation of the first report on Extractive Industry Transparency Initiative (EITI) is being finalized. Its publication will improve credit rating, introduce international reporting standards, promote natural resources management system and strengthen international and private partners’ trust in Ukraine. ‘Operational direction’ of the Ministry of Fuel, Energy and Coal Industry was aimed at fuel supply diversification. Demchyshyn stated the Ministry managed to increase the level of energy security of Ukraine due to diversification of natural gas supply during the past year. Reverse supply volume significantly exceeds volume of imported Russian gas at present. Moreover, the Ministry managed to negotiate the price of 227.40 USD/1 thousand m3 in the 4th quarter of 2015 with Gazprom, as compared to 337.1 USD in the 1st quarter. Attempts to diversify supply sources for nuclear power stations continue as well. Contracts with alternative suppliers, namely Westinghouse, on supplying modified fuel assemblies and uranium enrichment have been signed.

The minister said this agreement provides Ukraine with a number of important advantages, namely on price and guaranteed fuel supply for all nuclear units in case of emergency. Cooperation with Russia on construction of the 3rd and the 4th nuclear units at Khmelnytska nuclear power station has been terminated, so the ministry is looking for a new partner from Europe or China at present.

Nuclear power industry is actively working on increasing nuclear power stations’ capacity, which will increase the amount of cheap electricity. Demchyshyn elaborated that the Rivne-Kyiv line will be commissioned this year. Moreover, Zaporizhzhia and Kakhovka electrical substations are being built. “These two lines will increase the output by 1.7 GW,” said the minister. Construction of spent fuel centralized storage facility started jointly with the Hall Company. The Minister emphasized this project will provide a possibility to save 200 million USD a year spent by Ukraine to store this fuel in Russia. It will also help reduce electricity tariffs inflation.

Privatization of electric power companies and coal producers is in progress. State privatization agencies have already been submitted documents for five companies. Moreover, the list of 26 coal producing facilities to undergo privatization in 2015 has been updated.

Following the third direction of the Ministry’s activity, it developed and submitted to the Cabinet of Ministers the new Development concept for the nuclear industry sector of Ukraine as well as the Concept of state special-purpose economic program for coal industry reform until 2020, which had already been approved by all the stakeholders, including trade unions. Demchyshyn also said that tariffs increase for natural gas and electricity for all the consumer categories, including households, is being phased in compliance with Ukraine’s obligations towards the International Monetary Fund. “Disadvantaged social groups must receive full-scale subsidies,” emphasized the minister, adding that the mechanism of drawing up subsidies has already been simplified. Passing the developed draft laws and concept of industries development, introduction of efficient response to investors’ needs for energy sphere and intensification of energy efficiency programs introduction are the main steps necessary to accelerate the reforms progress. Moreover, it is necessary to optimize expenses, improve management and introduce priority investment programs at the state enterprises, which will improve their financial standing, said the minister.

To find the detailed report of the Ministry of Fuel, Energy and Coal Industry, visit the Reforms Council web-site: http://reforms.in.ua