1.
Ukraine’s energy relations with the EU:
implications for competition
Oleksii Leshchenko, Gorshenin Institute
Brussels, Belgium
15 March 2012

2.
Ukraine-EU: Energy
• 25% of annually consumed in the EU gas
passes through Ukrainian territory (120
bcm/a)
• 75% of all exported gas from Russia to Europe
goes through Ukrainian territory
• The lowest transit rates in Europe (2.84 $)
• Underground gas storage capacity – 1/3 of EU
gas storage capacity (32 bcm)
• Largest consumer of Russian gas in the world
(25% of Gazprom European exports)

3.
Major Russian Gas Pipelines
Source:PetroleumEconomist

4.
• The 10-th largest gas consumer in the world
and the 30-th gas producer in the world
• Ukraine gas consumption equals to the Czech
Republic, Hungary, Poland, and Slovakia
combined
• Energy capacity of Ukrainian GDP – 40%
(World - 19%, Europe – 17%)
Energy efficiency in Ukraine

5.
Energy capacity of GDP of
Ukraine & other countries
Source: IEA, 2008 (PPP USD 2000)

6.
Assets and Vulnerabilities
GTS capacity 180 bcm/a/
“Metal scrap” if not utilized by
Gazprom

7.
Naftogaz - Oil&Gas Monopoly
Production &
Refinery
Transportation Sales &
Distribution
SC Ukrgas
production
SJSC Chornomor
naftogas
OJSC Ukrnafta
(50%+1 share)
SC
Ukrtransgaz
OJSC
Ukrtransnafta
SJSC
Ukrspetstransgaz
SC Gas of
Ukraine
SE Ukravtogaz
Heat power
generating
companies
97% of oil & gas
production
100% of oil & gas
transportation
100% of gas
distribution

8.
Ukraine and the European
Energy Community
• Became a member on Feb. 1, 2010
• More competition in the domestic market
• Higher technical standards and regulations
• Better investment climate
• Further integration of Ukrainian energy sector
with the EU
• Enhance energy security
• Access to international loans and technical
assistance

9.
• Ukraine expected blocking of the “South Stream”
and investments in the GTS modernization
• EU expected reforms of the internal market
• Ukrainian government uses membership in the EEC
to promote reforms that do not enhance
competition but strengthen manual control: law on
oil and gas sector reforming entitles the Cabinet of
Ministers to unilaterally reorganize the energy sector
• This state of affairs is at hand to third parties
Ukraine and the European
Energy Community - reality

10.
Implementation
• Gas produced in Ukraine should be used to
meet the needs of the population and housing
and communal complex
• Gas produced in Ukraine may not be exported
• Gas produced in Ukraine is sold by regulated
tariffs
• Profitability of the state gas production
companies is limited to 15%

11.
• Regulations on the access to the GTS of the
third parties are postponed until mid-2012
• Law on Naftogas restructuring submitted to
the Parliament
Implementation

12.
Third Energy Packet
• National Electricity Regulatory Commission is
directly subordinated to the President, and
this fact can influence independence of the
regulator
• Property unbundling: restructuring of
Naftogaz is not transparent

13.
www.gorshenin.eu