Ukraine’s energy relations with the eu
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Ukraine’s energy relations with the EU: implications for competition
Oleksii Leshchenko, Gorshenin InstituteBrussels, Belgium
15 March 2012
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Ukraine-EU: Energy• 25% of annually consumed in the EU gas
passes through Ukrainian territory (120 bcm/a)
• 75% of all exported gas from Russia to Europe goes through Ukrainian territory
• The lowest transit rates in Europe (2.84 $)• Underground gas storage capacity – 1/3 of EU
gas storage capacity (32 bcm)• Largest consumer of Russian gas in the world
(25% of Gazprom European exports)
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Major Russian Gas PipelinesSo
urce
: Pet
role
um E
cono
mist
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• The 10-th largest gas consumer in the world and the 30-th gas producer in the world
• Ukraine gas consumption equals to the Czech Republic, Hungary, Poland, and Slovakia combined
• Energy capacity of Ukrainian GDP – 40% (World - 19%, Europe – 17%)
Energy efficiency in Ukraine
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Energy capacity of GDP of Ukraine & other countries
Source: IEA, 2008 (PPP USD 2000)
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Assets and Vulnerabilities
GTS capacity 180 bcm/a/ “Metal scrap” if not utilized by
Gazprom
1/3 of the EU gas storage
capacity/”Empty hole” if not
integrated in the EU infra.
Direct access to 4 EU MS/
No common market
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Naftogaz - Oil&Gas Monopoly
Production & Refinery
Transportation Sales & Distribution
SC Ukrgas production
SJSC Chornomor naftogas
OJSC Ukrnafta (50%+1 share)
SC Ukrtransgaz
OJSC Ukrtransnafta
SJSC Ukrspetstransgaz
SC Gas of Ukraine
SE Ukravtogaz
Heat power generating companies
97% of oil & gas production
100% of oil & gas transportation
100% of gas distribution
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Ukraine and the European Energy Community
• Became a member on Feb. 1, 2010• More competition in the domestic market• Higher technical standards and regulations• Better investment climate• Further integration of Ukrainian energy sector
with the EU• Enhance energy security• Access to international loans and technical
assistance
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• Ukraine expected blocking of the “South Stream” and investments in the GTS modernization
• EU expected reforms of the internal market• Ukrainian government uses membership in the EEC
to promote reforms that do not enhance competition but strengthen manual control: law on oil and gas sector reforming entitles the Cabinet of Ministers to unilaterally reorganize the energy sector
• This state of affairs is at hand to third parties
Ukraine and the European Energy Community - reality
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Implementation
• Gas produced in Ukraine should be used to meet the needs of the population and housing and communal complex
• Gas produced in Ukraine may not be exported• Gas produced in Ukraine is sold by regulated
tariffs• Profitability of the state gas production
companies is limited to 15%
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• Regulations on the access to the GTS of the third parties are postponed until mid-2012
• Law on Naftogas restructuring submitted to the Parliament
Implementation
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Third Energy Packet
• National Electricity Regulatory Commission is directly subordinated to the President, and this fact can influence independence of the regulator
• Property unbundling: restructuring of Naftogaz is not transparent
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www.gorshenin.eu