ODESA — The European Union remains interested in a gas transportation consortium based on Ukraine’s gas system. EU Commissioner for Energy Gunther Oettinger has made this perfectly clear. Europe, moreover, will collaborate with Ukraine in upgrading its gas transportation system. This issue was on the agenda of the international forum “Aiding Energy Safety and Investments in the Black Sea Region” held in Odesa recently, with Ukrainian, Bulgarian, Russian, Georgian, Romanian, Turkish, and EU delegations taking part, along with industrialists and delegates from international and non-governmental organizations. The forum lasted a single day and the participants discussed ways of using most of the Black Sea’s energy potential, allowing for the tangible obstacles that have held back energy projects for the past several decades.
This international conference focused on energy safety and foreign inland investment projects. Andre Mernier, Secretary General of the Energy Charter Secretariat, stressed that multilateral organizations would play a major role in the stepping up of energy projects in the region — above all, the Energy Charter and the Organization of Black Sea Economic Cooperation (BSEC).
Oettinger declared that progress in Ukraine-EU cooperation would be totally dependent on the rate of reforms within the Ukrainian gas transportation system, as well as on the degree of upgrading the industry. Ukraine’s determination to modernize its gas transportation industry would give a fresh impetus to [foreign] loans and investments.
Oettinger stated that the EU is prepared to finance such upgrading projects in the gas sphere in Ukraine. He stressed that gas and other energy supplies constitute the most important collaboration factor in the Black Sea region, and that the EU would like to develop the southern supply/transit route, for this would meet the interests of suppliers, transit countries, and buyers. He went on to say that the EU dependence on imported energy supplies would increase by 70 percent in the next 20 years, and that looking for new energy supplies to EU countries from the Black and Caspian Sea regions is the highest priority. He said that China would take over the construction of new Black/Caspian-Sea-Europe gas/oil pipelines if Ukraine failed. EU experts believe that pipelines are the future of Europe’s gas sphere; that by the mid-21st century the Bosporus will have found itself unable to cope with gas/oil supplies from Russia’s Caspian and Russia’s sources via Turkey.
Ukrainian Fuel and Energy Minister Yurii Boiko stressed that Ukraine is interested in all energy projects, in collaboration with the EU, and that Kyiv is prepared and willing to keep upgrading the gas transportation system.
Black Sea resources constituted another important issue on the forum’s agenda. This region has a tangible energy potential. It’s a fact confirmed by prospecting for fresh energy sources in terms of gas hydrates. The renewable and alternate energy sources available in this region will also be used in the not-so-distant future.
Last but not least, the infrastructure in the Black Sea region (especially power transmission systems) has to be upgraded, especially with regard to multilateral business instruments, like the Energy Charter Treaty and Organization of the BSEC. The aid package includes legal framework to support such energy projects, along with the clearly stated rules of the game, holding forums meant to uphold a political dialog and cooperation, as well as to secure financial and logistic resources.
While the forum was underway, it became known that the BSEC was also planning a [sub-]foundation [to keep the regional energy infrastructure under control]. According to BSEC Secretary General Leonidas Chrysanthopoulos, this project is being studied by the Black Sea Reconstruction and Development Bank and other financial institutions. He went on to say that the main BSEC objective is to develop the energy infrastructure of the Black Sea region, with the emphasis on making a single energy supply circuit involving the coastal states, along with harmonizing their legislation to create a green-light region, securing energy supplies and environmental safety measures.
Dario Chello, Director for Energy Efficiency and Investment, Energy Charter Secretariat, said that the Black Sea region is more than a transit route, that it can offer extraction opportunities, including natural gas, although such projects would be hard to implement in the short term, for this would require heavy financing and costly technologies. Under such circumstances, the EU has to cope with diversified energy supplies from Russia and carry out pipeline projects. Dario Chello went on to say that the Energy Charter Secretariat’s task was to analyze the situation in the region and encourage large investment groups to get involved.
James Sherr, Head, Russia and Eurasia Programme, Chatham House, opined that the EU ought to analyze the possibility of upgrading the gas sector and increasing its output, along with determining one’s own contribution to this project and drawing up a list of reforms to be carried out in Ukraine.
Sherr predicts that Ukraine-Russia relationships in the energy sphere will remain strained, and that this situation will not be resolved without the EU stepping in. He believes that Ukraine’s new political leadership underestimates the Russian factor, particularly the northern neighbor’s mounting pressure in the energy realm. Sherr said that Ukraine would be hard put to attract investments in its energy sector because of the feud in the upper echelons of power in Ukraine and Russia.
Ukrainian political analysts believe that Kyiv may come up with an alternative to Russia’s South Stream [a gas pipeline to transport Russian natural gas to the Black Sea to Bulgaria and further to Italy and Austria]. Dmytro Brzhezstovsky believes that “Ukraine is fully equipped to supply the same amount of gas to Burgas in Bulgaria, using its own gas transportation system, although this project is still on paper. [Prime Minister Mykola] Azarov is known to have stated that contacts are regularly taking place in regard to this issue; that several top-level meetings will take place in a month’s time to resolve this matter. Sad but true: the Ukrainian prime minister’s statements may well remain on paper, considering that Russia is taking some interest in Ukraine’s gas transportation system, being fully aware of its importance in the ongoing competition on the world gas market. Here the main thing is the way the Kremlin will go about getting Ukraine involved, the stand Kyiv will take, making its choice between European integration and Moscow’s proposals.”
Experts agree, however, that the energy — particularly gas — will become increasingly important in the Black Sea region.
