<ul><li>Marc-Antoine Eyl-Mazzega </li></ul><ul><li>Centre d’Etudes et de Recherches Internationales (CERI / Sciences-Po)  ...
Building an effective gas market <ul><li>Challenges and constraints </li></ul><ul><li>Gas market has not been adapted to m...
Building an effective gas market <ul><li>Assets </li></ul><ul><li>Unique storage facilities, well located </li></ul><ul><l...
Building an effective gas market <ul><li>Key issue </li></ul><ul><li>Having a liquid gas market, with relatively optimal a...
Building an effective gas market <ul><li>The check list (1) </li></ul><ul><li>Is diversification of supplies possible ? No...
Building an effective gas market <ul><li>The check list (2) </li></ul><ul><li>Is a gas market without Russian participatio...
Building an effective gas market <ul><li>The agenda of reforms (1) </li></ul><ul><li>   EU lead reform agenda usefull, bu...
Building an effective gas market <ul><li>The agenda of reforms (2) </li></ul><ul><li> Let Russian actors in: the more, th...
Building an effective gas market <ul><li>The agenda of reforms (3) </li></ul><ul><li>Get a workable deal with Russia: grea...
Building an effective gas market <ul><li>A Gas consortium? </li></ul><ul><li>Objectives:  </li></ul><ul><li>secure funding...
Building an effective gas market <ul><li>Future actors on Ukraine’s reformed gas market </li></ul><ul><li> Production:  <...
Building an effective gas market <ul><li>Future of Naftogaz in the gas sector </li></ul><ul><li>- Be the country’s most im...
Conclusion (1) <ul><li>Russia may be difficult partner, EU may be disappointing, but: </li></ul><ul><li> The ball lies in...
Conclusion <ul><li>Bring market rules in !  </li></ul><ul><li>Bring foreign investors in !  </li></ul><ul><li>Bring new pl...
<ul><li>Thank you! </li></ul><ul><li>[email_address] </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional secu...
Upcoming SlideShare
Loading in …5
×

Section5 eyl mazzega-eng

659 views

Published on

Presentation 'Ukraine, between Russia and the EU: Strengthening regional stability through an effective and reformed gas market in Ukraine' by Marc-Antoine Eyl-Mazzega, Centre d’Etudes et de Recherches Internationales (CERI / Sciences-Po), at Lviv International Security Forum, April 15-16 2010

Published in: News & Politics
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
659
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Section5 eyl mazzega-eng

  1. 1. <ul><li>Marc-Antoine Eyl-Mazzega </li></ul><ul><li>Centre d’Etudes et de Recherches Internationales (CERI / Sciences-Po) </li></ul>Ukraine, between Russia and the EU: Strengthening regional stability through an effective and reformed gas market in Ukraine Presentation for the Regional Security Conference Lviv, 15-16/04/2010
  2. 2. Building an effective gas market <ul><li>Challenges and constraints </li></ul><ul><li>Gas market has not been adapted to market prices </li></ul><ul><li>Important level of gas consumption, especially public sector </li></ul><ul><li>Important value of state subsidy to the public sector </li></ul><ul><li>Single external gas supply source, hardly any other reachable as real alternative and diversification </li></ul><ul><li>Naftogaz near monopoly of imports, production and distribution though in a fragile situation due to intrigues and economics of gas imports </li></ul><ul><li>No rule of law, inefficient state regulation, conflicts between various private interests leading to instability </li></ul><ul><li>Rules of the game are political </li></ul><ul><li>No or hardly any credits available for the Ukrainian market </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  3. 3. Building an effective gas market <ul><li>Assets </li></ul><ul><li>Unique storage facilities, well located </li></ul><ul><li>Relatively important domestic production and existing reserves </li></ul><ul><li>Important transit volumes providing huge revenues </li></ul><ul><li>One of the world’s leading gas producer and exporter is the neighour </li></ul><ul><li>Many possible alternatives to gas available, just need to be developped </li></ul><ul><li>Ukraine draws attention from investors, far more could come in </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  4. 4. Building an effective gas market <ul><li>Key issue </li></ul><ul><li>Having a liquid gas market, with relatively optimal and reasonable market prices, efficient, predictible, depoliticized and secure regulation through competition of actors, security of supply and mitigation of strategic risks </li></ul><ul><li>Key risks: </li></ul><ul><li>Price setting by dominant external actor and political and economic influence taking through gas supplies; Deterioration of infrastructure; Contradiction between private interests and state interests and use of state ressources for private interests; Ruin of state budget; Intransparency </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  5. 5. Building an effective gas market <ul><li>The check list (1) </li></ul><ul><li>Is diversification of supplies possible ? No </li></ul><ul><li>Is reduction of state subsidy to public sector possible? Yes </li></ul><ul><li>Is reduction of public sector’s gas consumption possible? Yes </li></ul><ul><li>Can gas be substitueted by alternatives fuels? Yes </li></ul><ul><li>Is reduction of Ukrtransgaz gas consumption possible? Yes </li></ul><ul><li>Is increase of internal production possible ? Yes </li></ul><ul><li>Is improvement of market conditions possibles? Yes </li></ul><ul><li>Is development of alternative fuels possible? Yes </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  6. 6. Building an effective gas market <ul><li>The check list (2) </li></ul><ul><li>Is a gas market without Russian participation possible? No </li></ul><ul><li>Can Ukraine afford continuing under the same system? No </li></ul><ul><li>Can the state budget further support the current level of subsidy? No </li></ul><ul><li>Can Naftogaz survive its indebtness? Hardly </li></ul><ul><li>Should the Ukrainian citizen be satisfied with the current system? No </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  7. 7. Building an effective gas market <ul><li>The agenda of reforms (1) </li></ul><ul><li> EU lead reform agenda usefull, but not the one and only task </li></ul><ul><li> Increase domestic gas production to increase competition with Russian gas </li></ul><ul><li> Decrease public sector’s gas consumption to decrease burden on state budget and free up domestic gas for the industry </li></ul><ul><li>Increase the regulated prices, also for electricity! Differentiate consumers on the basis of their status: retired, or active </li></ul><ul><li>Use transit revenues to modernise gas pipeline system and finance the remaining state subsidy </li></ul><ul><li>Provide for exceptionnal investment conditions for foreign, private investor in the energy sector (otherwise no money will come and nothing will happen) </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  8. 8. Building an effective gas market <ul><li>The agenda of reforms (2) </li></ul><ul><li> Let Russian actors in: the more, the better ! </li></ul><ul><li> Provide for innovative market access conditions and licence obligations for new actors on the distribution market: supply at least 15% of gas at regulated prices, store 20% of domestic supplies, pay taxes in Ukraine, provide for strong financial guarantees, and for long term gas supply contracts </li></ul><ul><li> Provide for transparent, stable and predictible working conditions for gas actors: rule of law is key, clear competition law with benchmarks, same as an independant regulator, with extensive energy security responsibilities and capacities to act </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  9. 9. Building an effective gas market <ul><li>The agenda of reforms (3) </li></ul><ul><li>Get a workable deal with Russia: greater flexibility of supplies, better price, in exchange for direct access to domestic consumers and relative advantage on the gas transit price </li></ul><ul><li>Make Naftogaz ready for competition and reforms, separe the gas from the oil function to make it more efficient in turning Naftogaz into a holding with two branches, NeftUkrajina and GazUkrajina and transform it into a dynamic gas actor </li></ul><ul><li>Rather to think about an LNG terminal, think about acceeding to Baumgarten gas </li></ul><ul><li>Establish a predictible, attractive and secure market and political environment to attract European companies in Ukrainian storage </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  10. 10. Building an effective gas market <ul><li>A Gas consortium? </li></ul><ul><li>Objectives: </li></ul><ul><li>secure funding for modernisation; strengthen trust as a gas transit corridor; improve transparency; ensure best level of revenues for state budget; develop opportunities for creating value through the gas storage facilities. The increase of volumes in transit or attempts to avoid alternative pipelines is irrealistic ! </li></ul><ul><li>What to do? </li></ul><ul><li>Unbundling; project of concession; new study of pipeline system technical state; decide whether investors will make money or just provide for stability; calculate what it may cost and benefit the state </li></ul><ul><li>What should Ukraine not do? </li></ul><ul><li>Consider the consortium issue in view of other stakes (gas price) and mix up short term arrangements with long term interests </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  11. 11. Building an effective gas market <ul><li>Future actors on Ukraine’s reformed gas market </li></ul><ul><li> Production: </li></ul><ul><li>At least two international majors working under PSA </li></ul><ul><li>Increased number of Joint production agreements with Naftogaz </li></ul><ul><li> Imports and distribution : </li></ul><ul><li>50% of industrial sector to be supplied by two Russian companies; 20% by Naftogaz; 20 % by private, Ukrainian companies; 5% by non Russian, foreign companies </li></ul><ul><li> Infrastucture and networks : </li></ul><ul><li>Naftogaz/Private companies, even Russian, provided that strong regulatory framework providing for energy security, transparency and third party access </li></ul><ul><li> Exports/transit </li></ul><ul><li>Gazprom, private Ukrainian and foreign companies, Naftogaz </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  12. 12. Building an effective gas market <ul><li>Future of Naftogaz in the gas sector </li></ul><ul><li>- Be the country’s most important gas producer </li></ul><ul><li>- Possibly, be the operator of gas transit infrastructure and storage facilities, or co-operator (if consortium) </li></ul><ul><li>- Rely on a long term supply contract from Gazprom with reduced volumes (10-15 bcma) </li></ul><ul><li>- Obtain a better market price from Gazprom in exchange for direct access to final consumer in Ukraine </li></ul><ul><li>- Supply gas to about 70% of public sector at regulated, though increased prices and thus benefit from increased revenues </li></ul><ul><li>- Supply gas to about 20% of industrial consumers at market price </li></ul><ul><li>- Provide for budget revenues to cover the remaining subsidy </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  13. 13. Conclusion (1) <ul><li>Russia may be difficult partner, EU may be disappointing, but: </li></ul><ul><li> The ball lies in Ukraine’s hands. Urgent action needed, no further complaints, or irrealistic projects </li></ul><ul><li>Ukraine should prepare for a different external gas equilibrium within the next 5 years. Ukraine will in no case transit more than current gas supplies. Important decrease of gas volumes in transit is likely (at least, 20%) </li></ul><ul><li>Ukraine should change its gas market before it gets into further, heavy trouble and will suffer irreversible losses </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  14. 14. Conclusion <ul><li>Bring market rules in ! </li></ul><ul><li>Bring foreign investors in ! </li></ul><ul><li>Bring new players in the distribution and production! </li></ul><ul><li>Let the market do its job ! </li></ul><ul><li>Be prepared to suffer some inevitable costs at first ! </li></ul><ul><li>Change before it’s too late ! </li></ul><ul><li>Start developing a real gas policy ! </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010
  15. 15. <ul><li>Thank you! </li></ul><ul><li>[email_address] </li></ul>Marc-Antoine Eyl-Mazzega – Lviv conference on regional security, 15-16/04/2010

×