The main topic of this year’s summit is to invest in the Ukrainian energy sector and overcome barriers on this path. The mangers of the world’s largest energy companies, international financial organizations and banks, as well as European Commission representatives will come to the capital of Austria to discuss these matters. Den is a media partner of this forum. The next few issues of this newspaper will highlight the most heated expert debates, the most important results, and exclusive interviews with the summit’s participants and guests.
On the eve of the summit, a few interesting events occurred in the energy life of the European community and Ukraine, which are going to affect the course of the Vienna debates.
Firstly, Russia has launched the Nord Stream gas pipeline which will be transporting gas to Europe across the Black Sea bottom, bypassing Ukraine. The Stream has already been dubbed an alternative to the Ukrainian pipeline because its installed transit capacity is an annual 27 billion cubic meters of gas. So if Russia does not increase the production and sales of gas in the foreseeable future, there is a risk that Nord Stream will divert a part of the Russian gas which Ukraine is currently transporting to Europe.
Secondly, the Ukrainian leadership is clearly signaling the public that this country will get new Russian gas prices in November. Experts believe that the establishment of a gas transportation system (GTS) management consortium will be the bargaining chip in the Russia-Ukraine gas negotiations. But this raises the question of who will enter it and how votes will be distributed to manage the consortium. It is beneficial for Russia to have a bilateral format of the consortium (transporter and seller). But it should not be forgotten that in March 2009 Ukraine and the EU signed the Brussels Declaration, whereby the latter is prepared to invest considerable funds in modernizing the Ukrainian GTS. In other words, 2.5 years ago the European Union officially proposed that Ukraine and the EU jointly manage the GTS. Some time later the Europeans announced they were prepared to allot real money for this modernization. For example, in an interview with The Day, the EBRD’s Country Director for Ukraine, Andre K svek, said that the bank was ready to invest a billion dollars in the modernization of the Ukrainian gas transportation system over five years.
So how can this course of events affect Europe’s investment plans with respect to Ukraine? The Day asked this question to some leading Ukrainian experts.
“The launching of Nord Stream only shows the diversification of supply routes rather than sources, as the EU would like,” says Valerii BOROVYK, chairman of the board of directors of the New Energy of Ukraine Alliance. “Europe finds it profitable to invest in no other than the Ukrainian GTS because it is the cheapest way to transport Russian gas to their consumers.” To confirm this, the expert quotes the following data: the market rate of the transit of Russian gas across the Ukrainian territory was to be about 9 dollars per 1,000 cubic meters per 100 km, but in reality four times as little is being paid. “2.4 dollars is not the amount Europe is going to pay for the supply of Russian gas through other, alternative, routes,” he hints. So Borovyk says Europe will undoubtedly evince stable interest in the Ukrainian pipeline.
“The Ukrainian pipeline was, still is, and will be for at least 20 years interesting to Europe, for it is capable of pumping almost 140 billion cubic meters of fuel. Besides, Ukraine has high-capacity underground gas reservoirs which ensure a stable rhythm of gas delivery, which no bypass stream will provide,” Pavlo KACHUR, ex-minister for civil construction, architecture, and public utilities of Ukraine, says.
Mykhailo HONCHAR, energy program manager at the Nomos center, shares the above-mentioned opinions. In his view, the government must reorganize the National Joint-Stock Company Naftohaz Ukrainy as soon as possible and fulfill all the clauses of the treaty within the framework of the Energy Community which Ukraine joined in December 2010 – in this case the funds necessary for GTS modernization will be made available. He estimates that the amount of investments will vary between 3 and 5 billion dollars, depending on the interpretation of the term “modernization.”
Yurii KOROLCHUK, director of the Energy Research Institute, thinks that the Ukrainian GTS is in an excellent technical condition. This is also confirmed by a Mott MacDonald research team which says that the main problem of the Ukrainian pipeline is lack of the proper funding of routine maintenance. So, the expert says, modernization should be interpreted as expansion of the Ukrainian GTS’s transit capacities, including finishing the construction of the Bohorodchany-Uzhhorod pipeline, rather than a complete replacement of the underground pipes. It is much cheaper, he says in conclusion.
What can also attract investors, in addition to the pipeline, are projects to modernize power-generating facilities and energy transportation main lines, and to develop the alternative sources of energy. The latter fact is of special interest, for Ukraine is offering today some of the highest “green rates” for the energy produced from the sun, wind, and water.
Borovyk says that a special subject of investment talks is building a liquefied natural gas terminal on the Black Sea coast. The estimated cost of this project, including the infrastructure for delivering this gas across the Black Sea, is about 1.5 billion dollars. Experts forecast that, when this project is carried out, Ukraine will be receiving an annual 10 billion cubic meters of Azerbaijan gas.
