EU Ready to Invest Into Ukrainian Gas Transporting System Modernization

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EU Ready to Invest Into Ukrainian Gas Transporting System Modernization

PR Newswire KYIV, Ukraine, October 25, 2012

KYIV, Ukraine,October 25, 2012/PRNewswire/ --

The EU is set to contribute to the modernization of the Ukrainian gas transporting system as soon as Ukraine finalizes terms of the project, said the Head of the Delegation of the EU to Ukraine Jan Tombinski. Ukraine will come up with the project terms after receiving the results of the GTS assets valuation.

At the moment, Baker Tilly Ukraine is valuing the pipelines and storage facilities of Naftogaz. The company won the USD 510,000tender to complete the work inUkraine, reportsBloomberg. Previously, the valuation of assets of the Ukrainian gas transporting system was held in 2007 - the system was estimated to be worth almostUSD 25 billion- and in 2009, then the price was nearlyUSD 10 billion.

Currently, Ukrainian gas transporting system is owned and managed by the state company Naftogaz. The country plans to restructure the company in order to divide the functions of gas transporting, purchasing, and selling between legally independent entities. InOctober 2012, the Cabinet of Minister ofUkraine discontinued the monopoly of Naftogaz on the sale of imported gas.

InFebruary 2012, Ukraine called for a tripartite gas consortium, featuring Ukraine, the EU, and Russia as managers of Ukraine's GTS. The modernization of the system w ould become one of the main tasks of the consortium . It would be responsible for management of the system and ensuring stability of gas supply to Europe. Ukraine expects to receive 34 percent share of the consortium, while E urope and Russia get 33 percent each.

Reportedly, Ukraine uses about two thirds of the estimated capacity of its gas transporting system, which already supplies some 70 percent of Russian gas to Europe. Renovation of the system would allow for the increase of the transfer capacity. It would also be beneficial since building alternate gas transporting routes requires time, financial and human resources, and creates unnecessary threats to the environment, emphasized President of Ukraine Viktor Yanukovych at the time.

InMay 2012, Russia announced its terms for joining the consortium - the ownership of the gas transporting system had to be handed over to the consortium. Russia perceives the third - European - participant in the consortium as a possible referee between Russia and Ukraine, should any conflicts occur.