Ukraine and the European Union have initialed a joint declaration on international investments in the upgrading of Ukraine’s gas transportation system. The Ukrainian side believes this instrument will help renovate its gas transportation system while keeping it state property. Official Kyiv also regards the signing of the gas declaration as proof of confidence on the part of the EU and an apt opportunity to “stop all talk about the unreliability of Ukraine’s gas transportation system.” Will Ukraine’s gas pipelines be really modernized, made “transparent”, and secured against Russia’s encroachments? The Day has asked experts to comment on the actual meaning of the declaration and the possible practical consequences of its implementation.
Volodymyr SAPRYKIN, director of energy programs, Razumkov Center:
“Apart from the EU and Russia, it is obvious that the Ukrainian government has declared that it has the political will to make reforms in the gas sector. This political will has been absent for 17 years. If what has been declared comes true, Ukraine will start implementing the EU gas directives. If these directives are carried out, Ukraine will have a truly competitive and transparent gas market.
“What regards the problematic aspects of the meeting [in Brussels], everybody could see how the Russian delegation left slamming the door. In my opinion, there are certain infelicitous things in this case. The documents should not have been prepared only in the EU–Ukraine format. Why? Here is an example: in order to increase its transit capacities, Ukraine cannot do without dialog with Russia. Therefore, it is necessary to seek consensus within the Ukraine–EU–Russia triangle.”
Hennadii RIABTSEV, deputy director, Psykheia Science and Technology Center:
“The signing of this declaration is only the first step on the road of reforms in Ukraine’s gas transportation system. We have to wait for the appropriate steps to be taken to translate good intentions into actual modernization. The fact remains that such declarations haven’t thus far yielded any practical results.
“What concerns Russia’s role in this process, I think it will not obstruct it. Modernization of Ukraine’s GTS does not necessarily mean an increase in its transit capacities. There is the design rate of flow that can be increased by building several additional oil and gas pipelines next to the main ones, increasing the diameter of the existing pipeline, or increasing the pressure in the gas pipeline. However, Russia will need to give its consent in the form of guarantees to supply more gas through Ukraine, which will be possible if Europe’s gas demand increases. This isn’t the case at the moment.”
Serhii YERMILOV, ex-Minister of Fuel and Energy of Ukraine:
“I hope that now they will find money for GTS modernization without making additional provisos, as was the case when the previous memorandums (on mandatory corporatization, privatization, or property right transfer) were considered.
“What concerns the technical condition of Ukraine’s GTS, I think it is better than in Russia whose GTS also needs additional funds for upgrading. This is explained by the fact that Russia’s GTS was built earlier than Ukraine’s. However, upgrading Ukraine’s GTS without Russia’s system will not increase the reliability of gas supplies to Europe, so Russia must modernize its gas transportation system and Europe must consider Ukraine’s and Russia’s systems together.”
Valerii BOROVYK, chairman of the board, the New Energy of Ukraine Alliance:
“I view the newly signed declaration as general declarative principles. Suppose you are an investor willing to invest in Ukraine’s GTS. What will you see? An unstable domestic political situation, the absence of compromise between various branches of power, and a volatile financial market situation across the world. Under the circumstances sizeable loans for various projects are issued only if it is actually possible to make big profits. In view of all this I wouldn’t expect quick results from the GTS arrangements.
“Today rumors are circulating that a large-scale tender will be held to determine a single company that will renovate the whole GTS and a single investor or a pool of investors. We have the bitter experience of holding a tender for the huge Black Sea shelf. If this happens again, Ukraine will end up placing the most attractive and promising part of the gas and oil complex into the hands of a single party.
“In order to prevent this, I suggest holding a maximum transparency tender with clear-cut terms and conditions. Since this project is so large and expensive, it will take at least a year. Meanwhile, it is feasible to upgrade, jointly with investors, 70 percent of the two- and three-compressor booster stations that are in the worst condition. What I mean is that the state must allow various companies (investors) to show their efficiency in pilot projects.”
