Experts: Experience of Slovakia is the most suitable mechanism to create oil reserves in Ukraine


The Slovak model is the most suitable scenario for creating oil reserves in Ukraine. It envisages the creation of a separate non-profit independent agency under the auspices of the State Reserve Agency of Ukraine. “We plan to prepare a draft resolution of the Cabinet of Ministers on the approval of this model until the end of this year. In November, it will be presented to public and mass media,” informed Vadym Mosiychuk, Chairman of the State Reserve Agency of Ukraine.

The creation of oil reserves in Ukraine is one of the prerequisites for European integration. A working group is producing the future model within the framework of the Project “Assistance to Ukraine in the process of implementation of energy sector reform in line with Ukraine`s international commitments.” It includes representatives of the State Reserve Agency, the Ministry of Energy and Coal Industry of Ukraine, as well as operators and participants in the oil market. “Now the project experts are developing two possible scenarios of the Slovak model,” said Angel Minev, Team Leader, Project “Assistance to Ukraine in the process of implementation of energy sector reform in line with Ukraine`s international commitments.” The first scenario involves 100% state funding. The second one reduces the state funding down to 70% and leaves 30% for operators and market participants.

“The example of Slovakia showed that to rely on the state budget means to jeopardize not only the accumulation but also replenishment of these reserves. Therefore, the option of attracting international financial donors, financial institutions, and commercial institutions is being considered,” added Mr. Mosiychuk.

Vadym Mosiychuk stressed that in the future model the tariffs for storage of reserves should be divided between the State Reserve Agency and market participants. “We want the State Reserve and the market participants to share responsibility. Analysis of the available storage capacities shows that the State Reserve Agency together with the strategic partner “Ukrtransnafta” should not and are not able to fully store these reserves. Therefore, the market participants should partially store these reserves on a commercial, market-based basis,” he explained. Vadym Mosiychuk added that in order to cover the storage capacity deficit it is possible to introduce an additional investment tariff.

For businesses, the creation of oil reserves means the collection of an additional tax. “Since this will be an additional tax, it is very important for the implementation of the model not to distort competition in the market. […] Besides, I think it is very important for the operator managing the reserves to be as independent of the state as possible,” added Yuriy Kuchabskyi, Vice President for Commerce of “Galnaftogaz” Concern.

If Ukraine starts accumulating oil reserves in 2018, it will be necessary to invest about UAH 5 billion in increasing the minimum oil reserves annually, noted Adrian Jasimi, Oil Expert, Energy Community Secretariat. “The final choice regarding the storage model and decision should be made by December of this year. In the first quarter of next year, the Government will have to approve a law on minimum oil reserves. In the second quarter of next year the law should be approved by the Parliament and President.” added Adrian Jasimi.