To discuss the third part of the Expert Forum organized by the Gorshenin Institute — discussion panel “Energy Security. The Ukrainian context” — were invited MP, Chairman of the Verkhovna Rada Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety Mykola Martynenko, Deputy Minister of Energy and Coal Industry of Ukraine, Ihor Didenko, CEO of the private joint-stock company “Smart-Holding” Oleksiy Tymofeyev, a Law Professor of CityUniversity (London), Fellow of the Center for European Policy Studies (Brussels) Alan Riley.
The present offered to discuss a wide range of general issues relating to the energy industry. But, assuming that a sufficient time to work was not foreseen, and speakers were many, each of those present drew the audience’s attention to the most critical, in his/her opinion, current issues.
In particular, MP M. Martynenko said that today energy is not only an economic component of the state, but also a factor of safety of Ukraine. After all, you must take care not only about the present, but also about the future. With this in mind, a number of legal acts of strategic importance have been prepared at the legislative level, For example, the Law “On the Gas Market” has already been adopted in the first reading, and next week it will be made available to the session hall of the Verkhovna Rada. The draft law is conceptual, provides for revision of the entire gas market in accordance with the Third Energy Package. Basically there is, so to speak, a balance of understanding of all factions, so it is likely that it will be finally adopted after a few days.
The next key law is the Law “On the National Regulator.” So far it is being studied by the Committee. It should be adopted before May 22, when the Board of Directors of the World Bank will be approving the decision to allocate 800 million US dollars for Ukraine. Without such a law such means won’t be given to Ukraine!
And the third law is an addition to the Law “On the Energy Market,” adopted at the end of 2011. It is still being worked on, and the time to address this issue is the current session.
Mykola Volodymyrovych also pointed out that in the energy sector, there are other urgent problems, including those related to green energy, thermal power generation, formation of tariffs.
The representative of the executive power I. Didenko drew attention of the audience to the practical issues, namely the fact that after the end of the heating season 2014/2015 we should to start preparing for the next season. To this end, the Government is negotiating to diversify gas supplies, taking steps to enter the European market of energy supplies. Ihor Mykolayovych told the present about the discussion of the issue of global banks’ giving lends for the heating season 2015/2016. Also was discussed the issue of termination of the activity on the territory of Ukraine of foreign oil and gas companies.
Representative of business, O. Tymofeyev briefly reported that SMART is one of the domestic companies, has long been operating on the gas market and, despite the difficult market situation, it does not turn off. The company has invested into mining operations in Ukraine almost 400 million US dollars. This actually surpasses the funds allocated by other investors taken together. The company uses deep wells both, up to 5 km, and 5 km and more… The statement that the oil industry is a very profitable business, able to transfer more funds to the state budget, is not true. In Ukraine, no more than 20-25 % of the wells are successful, while 75 % of investments into oil and gas production do not meet expectations. Based on his experience of work in state oil and gas companies (O. Tymofeyev for a long time worked in the “Naftogaz of Ukraine”), he is optimistic about the future of his company, saying that if they do not overcome the current challenges and market trends, in the future they will have to start all over “from scratch.”
On the issue of foreign companies’ leaving the Ukrainian market, O. Tymofeyev explains that it is a consequence of the established fiscal regime that has made the industry unattractive from the investors’ point of view.
The foreign expert A. Riley in his speech expressed confidence that Ukraine is moving in the right reformist direction and therefore is winning in the gas industry. But negative role in this is played by the increase in rent payments on mining. This undermines Western partners’ trust. Besides, Slovakia could increase gas supplies to Ukraine, and the growth of rental supply would be advantageous to other European countries too. As for Ukraine, the expert believes that it has significant advantages due to gas storage facilities, transit networks. And as soon as the market is liberalized and private investors get access to gas networks, Kyiv’s price will be the main price of the reversible gas. According to A. Riley, the consequence of liberalization of the European market can be considered the beginning of the proceedings against JSC “Gazprom”, in which are analyzed discrepancies of gas prices, violating the European requirements. Ukraine should also use such approaches and attract to the process its specialists, including the ones with international experience. The main question for the study — the rules of free competition.
During the discussion ex-Minister of Fuel and Energy, the head of the Supervisory Board of “Kyivenergo” I. Plachkov asked about the process of the integration of the Ukrainian energy system into the European one. M. Martynenko advised to ask the Government about it, and in the process added that Ukraine shall terminate such relations with Russia, but the cherished dreams of the integration with Western partners cannot be observed yet.
The invited to the event “Ukraine. Stress — test” voiced also other issues and approaches to solving the so-called gas problems, but somehow they all boiled down to the assessment of the energy security of the Ukrainian state.
