Ukrainian parliament rejects bill allowing U.S., EU investors to co-manage national gas transportation

It was reported that the document was to lift restrictions on a lease or concession of gas mains and underground gas storage (UGS) facilities to a company or companies on a pay basis without the right of alienation for functioning as a GTS and (or) UGS operator.

The Ukrainian parliament has rejected a government bill, "Amendments to several Ukrainian laws, reforming the management system of the Ukrainian gas transportation system (GTS)."

The bill was backed by just 170 people's deputies.

It was reported that the document was to lift restrictions on a lease or concession of gas mains and underground gas storage (UGS) facilities to a company or companies on a pay basis without the right of alienation for functioning as a GTS and (or) UGS operator.

The property can only be leased for the purpose, and in pursuance, of the obligations assumed by Ukraine under the law, "On the ratification of a Protocol on the Accession of Ukraine to the Treaty Establishing the Energy Community " on the basis of the Treaty and under the conditions approved by the Cabinet of Ministers, and in compliance with the principles of economic security of a state.

The functions of a Ukrainian GTS operator could be assigned to an enterprise with the state being its sole founder and owner, a state enterprise (holding at least 51% corporate rights) or a legal entity (legal entities) which is owned and controlled by residents of the European Union, the United States or the European Energy Community, operates a gas transportation system or is a member of the European Network of Transmission System Operators for Gas (ENTSOG), certified in accordance with the requirements under Article 10 of the Directive 2009/73/EC of the European Parliament and Council, regarding the common rules for the internal natural-gas market.

The same conditions should apply to a UGS operator.

Earlier the Cabinet agreed on the possibility of setting up two public joint-stock companies, "Main Gas Pipelines of Ukraine" and "Underground Storage Facilities of Ukraine," which would be 100% owned by the state.

The Ministry of Energy and Coal Industry, the State Property Fund and Naftogaz Ukrainy are to draft the companies' by-laws and hand over to them the property that is used to transport and store gas, not subject to privatization and appears on the balance-sheet of Ukrtransgaz.

The Cabinet also recommended that Naftogaz and Ukrtransgaz urgently take measures to bring their contractual relations concerning natural gas transit via Ukraine in line with the obligations to the Energy Community, in particular the requirements of the Directive 2009/73/EC (Third Energy Package) on the common rules for the internal natural-gas market. In addition, the ministry must take measures to terminate Naftogaz's functions of the operator of the single gas transportation system and assign them to Ukrtransgaz.

Ukrtransgaz, which is 100% owned by Naftogaz Ukrainy, operates the country's gas-mains system and 12 UGS facilities. The throughput capacity of the Ukrainian GTS is 288 billion cubic meters at the input and 178.5 billion cubic meters at the output, including 142.5 billion cubic meters for Europe and 3.5 billion cubic meters for Moldova.

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