The European energy market is going through a significant transformation due to rapid geopolitical, economical and technological changes.

As energy has no formal boundaries, sustainability and security of supply should be priorities for the bloc.

Why Ukraine’s gas potential matters for Europe

If we look from a wider prospective, Ukraine plays an important role in European energy security. Europe is highly dependent on Russia for its gas supply, but almost 15 European countries transit gas through the Ukrainian gas pipeline corridor.

Today, Ukraine buys gas from 15 independent European suppliers using reverse flows, predominantly from Poland, Slovakia and Hungary.

Despite security issues in the region, Ukraine is a reliable partner in terms of transporting gas, with one of the most powerful gas transmission systems in the world with a total length of 38,600km.

The system is integrated into the wider European gas network and links the systems of neighbouring Russia, Belarus, Poland, Slovakia, Hungary, Romania and Moldova. Taking these facts into account, the integration of Ukrainian gas, electricity, renewables, energy efficiency and the nuclear market with the EU's energy market is essential for regional energy stability.

Energy ties

Ukraine is focusing its efforts on developing strong energy ties with its nearest neighbours, especially Lithuania, Latvia, Slovakia, the Czech Republic, Hungary and Poland, in the framework of the East European Gas Hub.

The country is also strengthening cooperation between national gas transmission system operators (TSOs) across Europe, which are operating within the European Network of Transmission System Operators for Gas (ENTSOG), and are at a crucial point in strengthening our bilateral, gas-related dialogue.

Being at the geographical centre of Europe, at the East-West energy crossroads, with the biggest gas transmission system (GTS) and 12 gas storage facilities, Ukraine may be ideally suited to be a gas hub.

A physical or a virtual East European Hub could be an important development long-term towards transparency, competition and market liquidity.

This market solution could also eliminate political influence over gas prices and market inefficiencies.

Building a network of interconnectors by signing direct agreements with concerned parties, would make it possible to organize two-way gas flows, and ensure a virtual reverse by backhaul operations and swap transactions.

International cooperation

As a political response to energy security threats, the Ukrainian parliament has produced a clear and pragmatic Plan for Energy Security, as well as an Energy Security Law, modelled on the EU Energy Security Strategy, and best international practices.

The country plans to closely cooperate with the NATO Energy Security Agency as part of Euro-Atlantic integration.

The second solution is to reach energy independence through domestic natural gas production.

The estimated reserves of natural gas in Ukraine amount to about one trillion cubic meters. The state-owned gas production company Ukrgazvydobuvannya aims to increase gas production to 20 billion cubic meters annually by 2020, while Ukraine also has room for private gas producers.

Diversification

Developing the liquefied natural gas (LNG) market could be a possible source of energy diversification.

Ukraine does not have LNG terminals in its territory yet; however, we can use the existing infrastructure of neighbouring countries. For instance, Lithuania supplies gas through the LNG terminal in Klaipeda, and the Lithuania-Poland inter-connector. Last year, Ukraine and Poland signed an agreement on the design and construction of gas interconnection. Ukraine is also interested in the construction of its own LNG terminal.

Promising sectors for cooperation

On the power generation side, Ukraine is interested in developing cross-border electricity infrastructure with the EU, and has actively pursued the synchronization of the Interconnected Power System of Ukraine with the European Network of Transmission System Operators for Electricity (ENTSO-E).

Potential of renewables

Ukraine also has great renewable energy potential.

The technologically feasible potential of renewable energy in Ukraine is the equivalent of about 70 million tonnes of oil.

Ukraine's commitment under the treaty establishing the energy community is to achieve a target of 11% of energy from renewable sources before 2020.

Ukraine continues to work towards ecological improvements and combatting climate change. The country became one of the first to ratify the Paris Climate Agreement.

And in May 2016 Ukraine joined the International Renewable Energy Agency (IRENA).

One crucial sphere of mutual interest, which is of great importance for regional energy security, is cyber-security.

Europe’s energy facilities, and other critical infrastructure, face a high threat of cyber attack. Close cooperation with NATO's Energy Security Agency in the course of Euro-Atlantic integration is vital.

Ukraine has the potential to increase domestic gas production and generation, energy efficiency and renewable sources of energy. But it also needs access to LNG, to become a physical gas hub, gas interconnectors, to decrease coal generation and secure nuclear power plants.

To achieve these goals, the country needs to make substantial investments, which will allow it to move at the same pace as the rest of the democratic world.