AMBASSADOR'S BLOG - KYIV BEACHES AND GAS #3

Kyiv
20.07.11


In June 2009 I wrote a blog extolling the virtues of Kyiv’s beaches and noting the challenges Ukraine was then having paying its monthly bills for gas from Russia.  I noted the views of the international financial institutions (IFIs) that it would be easier to help Ukraine if the financial arrangements in the gas sector were more transparent.

In March 2010 I again blogged about beaches and gas (and skiing) noting that President Yanukovych had recently signed an anti-corruption decree and looking forward to the IFIs, the European Union and others investing in Ukraine.

There must be something about beaches and gas, because in the same period that a burst of sunny weather has brought thousands of Kyiv residents out onto the fabulous city-centre beaches of the Dnieper (see picture below), there have been several significant steps forward on energy here in Kyiv:
 
i) the parliament has passed a long-awaited amendment to the law on Production Sharing Agreements, which entered into force on 13 July.  The law is designed to ensure that future governments cannot unpick PSA contracts signed by previous ones.  This positive development should encourage investment by international energy companies in unconventional gas, natural gas and oil exploration in Ukraine;

ii) the Ukrainian government has announced a tender for a feasibility study into the proposed liquefied natural gas (LNG) terminal on the Black Sea.  Initial reports are that commercial entities have expressed strong interest.  The feasibility study will identify the technical requirements for the project prior to the publication of the tender for actually building the new terminal.  That terminal, in turn, should enable Ukraine to benefit from lower gas prices on international markets;

iii) the European Bank for Reconstruction and Development (EBRD) and Ukraine's national oil and gas company, Naftohaz Ukrayini have signed a memorandum on financing the first stage of the upgrade of Ukraine's gas transport system in a project which could be worth $539m over the next three years.  That upgrade will enhance safety, generate increased efficiency and bring potential long-term savings in the use of gas for running the system itself.

It’s good to see some movement on measures to increase energy efficiency and energy production in Ukraine, both of which have the potential substantially to increase the country’s energy efficiency – the theme of the Save Energy! Save Money! campaign on our website – and to slash expensive imports.  It’s also good that, at present, Ukraine is able to afford the gas it needs.  But the more that can be done to increase the transparency of arrangements in the energy sector and persuade investors in a café in Shanghai that Ukraine has a good business climate, the more quickly Ukraine will be able to attract the investment it needs to increase its energy sufficiency further.  

 

Leigh Turner



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