EU Operators in Talks with Ukraine on Pipelines
Ukraine's vertically-integrated gas monopoly Naftogaz is in talks with four European Union gas transmission system operators (TSOs) about taking over Ukrtransgaz.
Naftogaz CEO Andriy Kobolyev said October 25 that "a number of reputable Western companies had expressed their interest to participate in the operation of the Ukrainian transport system and that Naftogaz is negotiating with four interested TSOs from the EU."
Ukrtransgaz is being unbundled, so that it is independent of its owner; Naftogaz has appointed two companies as advisers. Accountancy giant PwC will advise it on the unbundling process itself, while banking and financial advisory group Rothschild will help with the choice of partner.
PwC director Pawel Dobrowolski told a conference in Kiev October 25 that unbundling Ukrtransgaz as a European Union-compliant independent TSO will be key to preserving gas transit via Ukraine after 2019, when Russia's contract to transit gas through Ukraine expires.
Unbundling the TSO will involve creating a 'lean' TSO with a few hundred employees that can apply for a certification under the EU regulations and be legally transfered to an entity designated by the government. The aim is to ensure that gas transmission remains stable during the unbundling.
Among pre-requisites for a successful unbundling, Dobrowolski mentioned updating the regulatory framework, establishing a proper corporate governance system in the new TSO, obtaining an arbitration decision in the Stockholm transit case, as well as enabling a potential engagement of a European TSO partner.
Kobelev said: “The engagement of a European partner or partners is a sole success criterion of our unbundling efforts. Unfortunately, a European partner will not guarantee the continuation of transit, however the absence of a partner will definitely result in the termination of transit.” It is expected that the government will approve the conditions for a competitive tender to engage a potential partner in November 2017.
Kiev has had problems improving corporate governance: four members of Naftogaz' supervisory board members have left this year, the last pair quitting mid-September over the government's lack of commitment to reforms.
William Powell