The 5th Ukrainian Gas Forum key points and quotes

The 5th Ukrainian Gas Forum took place on October 9-10 in Kyiv. Within it, the most relevant events in the sector, major problems and achievements were discussed: unbundling model, transit contract, launch of the intra-day gas market etc. Kosatka.media selected key points and forum quotes.

UNBUNDLING. Andriy Kobolyev, Head of NJSC Naftogaz, and Oleksiy Orzhel, Minister of Energy and Environmental Protection, jointly presented the unbundling mode. All parties are sort of satisfied. They say that it is enough time to carry out unbundling in order to sign a new transit contract with the new GTS Operator, because “there is no other choice”.

“It will be a fully independent, both financially and operationally, GTS operator”, said Minister Olexiy Orzhel.

Andriy Kobolyev, NJSC Naftogaz:

“We are now at a critical moment when we have the opportunity to do everything right with unbundling or to make a unique Ukrainian bicycle that will not ride again”.

“We have no other choice. If we miss the time, then Ukraine will be blamed for all problems next winter in Europe. We need to get a fully designed and created operator. Therefore, certification should be carried out before the end of the year”.

Baher Al-Hifnawi, the World Bank

“I’m surprised that the problem with the Regulator receives so little attention. The Constitutional Court described the Regulator as unconstitutional. And still it has to certificate a new company as part of unbundling as soon as possible, which, in turn, affects the entire energy security of both Ukraine and Europe.

Oksana Kryvenko, Chairman of the National Energy and Utilities Regulatory Commission

 “Last week, the GTS Operator provided the Commission with documents for certification, now they are being studied. 4 months are allotted to this by regulatory documents. But we plan to complete this process before the end of the year. Further, the certificate will be sent to the energy community”.  

 

NEW GAS TRANSIT CONTRACT. It all comes down to unbundling. And the European partners once again assure of support of Ukraine and are interested in transit.

Klaus-Dieter Borchardt, EC Director General for Energy:

“We need to achieve a fair balance of interests in terms of transit volumes. Ukraine, of course, wants to pump as much gas as possible in its capacity, while, as far as I see, Russia seeks flexibility, and does not want to sign a contract for some constant transit volume from year to year”.  

“When I look through Russian forecasts of gas demand in Europe, it shows growth. Then why doesn't Russia support a long-term contract with Ukraine?... We are concentrating our efforts on signing a long-term contract”.

Anka Feldhuzen, German Ambassador to Ukraine:

“Yes, we feel responsibility for the agreement on gas transit through Ukraine, and we understand that it is necessary to ensure the reliability of gas supply... Germany needs to equalize a large difference between supply and demand”.

Polish Ambassador to Ukraine, Bartosz Cichocki:

“...We are pushing for diversification not to depend on one office in Moscow...”

Andriy Gerus, Committee on Energy and Housing and Public Utilities in the Verkhovna Rada

“Anyway, we are ready for the worst-case scenario. Because the better you are prepared for the worst-case scenario, the less likely it is to happen”.

 

OWN GAS PRODUCTION: TO INCREASE OR NOT TO INCREASE. The policy of Naftogaz is as follows: not to spend a lot on production growth, because gas is cheap now. But drilling companies want to have a job.

Andriy Favorov, NJSC Naftogaz:

“When the economy changes, we must change our commercial decisions... We have a new strategy – economically reasonable production”.

“We are trying to shift the discussion on the volume of production to the cost of gas imports. If import is cheaper, then it is not economically feasible to increase our own production, which is more expensive”.

“Our business is not gas production, but making money. And if in the present circumstances it is more profitable to produce oil than gas, this is exactly what we will do”.  

Ihor Shchurov, DTEK Oil&Gas

“Now there is an intention to remove the stimulating rent. Of course, we understand the motivation of parliamentarians to close holes in the budget by raising rents for production, but this is unjustified. There will be more losses (VAT, income taxes, loss of investor confidence, etc.) than short-term benefits now... We don’t understand why the state is conducting experiments in the strategic sector of the country's economy”.

“Today, due to the threat of changing the fiscal regime, there is a risk of taking 2 steps back: this is not only the loss of investors, but also new technologies that have begun to enter the country. And after all this is a 180 degree”.  

Ihor Stepanishin, Ukrburservis:

“There are actually two markets – private miners and the UGV market. They try to coexist, but this does not always work. There is a competition in the private market. As for the UGV, this is not a fully understood political entity, until Prokhorenko’s team it was a completely closed and corrupt organization”.

“There is such nonsense that the Chinese and Hungarian drillers are still working, while the Ukrainian are actually quitting”.

“No matter how many times you will say the word “milk jam”, it will not be sweet. And no matter how much they say that we have a lot of gas reserves, the facts confirm the opposite... Fields put up by the Public Service of Geology and Subsoil of Ukraine for the development are too risky”.

 

DIRECT GAS PURCHASES FROM GAZPROM. The first who brought up the subject was Kobolyev. The opportunity for industry to directly import gas from Gazprom at the forum was called the market, without the intervention of political “taboos”. The main issue being asked is either the market price or the political one.

Andriy Kobolyev, NJSC Naftogaz

Nothing prevents Gazprom from selling gas to Ukraine at competitive prices. I will not discover America saying this. And I won’t be surprised if from January 1 we may see the export company of Gazprom as a supplier of gas to large Ukrainian enterprises.

Yaroslav Mudryi, ERU Trading:

“My only question is the price. If this is the market price according to some transparent formula, then we can work with it and compete. If we see that this is not a political price”.

Oleksandr Chalyi, Grant Thornton Ukraine

“If Russian gas entered the Ukrainian market, I think the price on the market would be less. But the existing political taboo cancels market rules”.  

 

THE INTERNAL GAS MARKET DEVELOPMENT. It is said about a large share of the state-owned company in the market, and as a result, state influence, praise the launch of the daily balancing of the market, are waiting for the creation of a full-fledged exchange, because without it the Ukrainian market is more like a “bazaar”.

Yaroslav Mudryi, ERU Trading:

“One of the main achievements of this year is the launch of the daily balancing. Now this is happening quite smoothly and without unnecessary papers. This already coincides with the norms and rules that work in the European market”.  

“We see that this year people believed in the possibility of storing large volumes of gas in Ukrainian storages. The main huge achievement is that private (!) Ukrainian and foreign companies retain their gas in our underground gas storage facilities... There are 2 billion cubic meters of private gas”.

Iryna Mykhaylenko, Naftogaz Trading:

“Now we do not have an organized market, I would call it a “bazaar”. Yes, in a certain sense, this is a market, but each company has its own contracts, its own prices, and its own products. There is no standard product. The market lacks organization and standardization, market indicators. It’s very important that a stock exchange, clearing, standard products and transparency be ensured”.  

Artem Kompan, RGC Trading:

“We are trying to find complex answers to a simple question. Because the market does not exist. If the state controls the price of 75% of the resource, this is not a market”.

Victor Gladun, JV Poltava Petroleum Company

“When the state promises one thing and then changes the conditions of the game, don’t ask why investors are not coming to Ukraine. But we want to help you! No need to help us! We’ve been helping ourselves for 25 years, just don’t change the conditions of the game”.

“When our share of market participants changes from 20% of private companies, 80% of state-owned companies by at least 50/50, then more or less market relations will be started”.

Marina Petrov, the EBRD

“Reforms must be constant, and the business environment must be predictable”.

 

 

Kosatka.Media

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