Ukraine's Naftogaz Signs Deal with China

Naftogaz, the state gas and oil company of Ukraine,  has signed a $3.656 billion (€2.75bn) credit agreement with the state-owned China Development Bank to finance the program of substituting natural gas with locally produced coal.

Ukraine wants to better its energy security and lessen dependence on foreign - mainly Russian - natural gas.

The contract, guaranteed by the Ukrainian government, stipulates implementation of four separate investment projects. These will transfer national thermal energy production facilities to using coal-water fuel, and build five coal gasification plants.

If successful the project will allow the replacement of about 4 billion cubic meters of natural gas with coal, create 2,020 jobs, help Ukraine save an average of €1.13bn annually and stimulate the production of 10 million tons of domestic coal per year. Ukraine will also receive modern technology, upgrade infrastructure as well as create a strong market for domestic coal producers.

According to the Kyiv Post, last July the Energy and Coal Industry and China Development Bank Corporation signed a protocol of cooperation concerning replacing the consumption of natural gas with that of coal. Under the program, a number of projects are to be carried out involving the transition of Ukrainian heat-producing facilities to using coal-water slurry as fuel, and also the construction of plants for the gasification of brown and bituminous coal in Luhansk, Donetsk, and Odessa Regions using Shell technology approved by China.

The agreement was confirmed in a brief statement posted on the government website by Energy Minister, Yuri Boiko.