Ukrainian Monopoly Seeks Change to Security of Supply Rules

State-owned Naftogaz Ukrainy is seeking support for its plans to overhaul the way companies reserve gas for emergencies in the country, it said February 10.

The present system no longer reflects the state of the market in Ukraine, it said, claiming credit for the introduction of some legal measures that already reflect the best practice of EU member states with respect to security of supply.

These normative acts allow "insurance reserves" of gas that guarantee secure supplies to be used more expediently in the event of unexpected interruptions of supplies to the population, the fuel and heating complex and socially important classes of consumer, it said.

Naftogaz says responsibility for creating an insurance reserve could become the sole burden of suppliers of protected classes of consumer. How much insurance gas the suppliers need should be calculated by the energy and coal minister on the basis of its analysis of the degree of risk of interruption, Naftogaz said.

Further, given the high credit risk of some market players, its subsidiary, the transmission system operator (TSO) Ukrtransgaz, faces severe risks related to its key activities: transport and commercial balancing.

These risks should be adequately covered by those who contract these services – producers, importers, traders, suppliers and consumers – Naftogaz said. The collateral should match the level of the risk that the work with each contractor carries.

For example, producers with a stable level of output or an industrial user operating a plant with steady demand should have a different requirement from a supplier which has practically no assets.

Naftogaz wants the insurance reserve to be a requirement only for suppliers with protected classes of consumer, as understood by the law on the gas market and by the rules of secure deliveries of gas, approved by the energy ministry. It also wants the transportation code to reflect each counter party's collateral to reflect the degree of risk it poses Ukrtransgaz.

William Powell