It’s the same story year after year. To ensure energy security, Ukraine must continue diversifying gas supplies, increase domestic production, promote energy efficiency and seek alternative fuel sources.
That’s what the main message was on the energy panel at the
12th annual Yalta European Strategy meeting in Kyiv on Sept. 11.
Naftogaz CEO Andriy Kobolyev was most concerned about Russia’s
intentions of pursuing the second phase of its Nord Stream pipeline project
that will boost yearly gas transportation capacity to 55 billion cubic meters
further reducing Ukraine’s role as a strategic transit country.
Describing the measure as part of Russia’s plan to eliminate
Ukraine as a country, he said Moscow is “willing to lose $10 than by taking $1
from us,” in reference to Ukraine potentially losing $2 billion annually from gas
transit revenues from Russia while keeping Kyiv as a limited gas customer.
Kobolyev cautioned that Russia’s project will create
bottlenecks in terms of supply in comparison to Ukraine’s capacity to move 140
billion cubic meters of gas.
Criticizing Europe for moving forward with the Nord Stream
project, Kobolyev said “we are a reliable partner to the European Union, we should
build new pipelines…behind our back there is approval of Nord Stream, we are
told this is business, but why replace our 140-billion-cubic-meter capacity
with 51 billion? The stake is about Ukraine not about gas. We have to do our
best not to let this happen.”
Ian Taylor, president and CEO of Rotterdam-based Vitol Group
energy giant, urged Ukraine to focus on its resources.
“Ukraine’s has the best energy security in the world because
it has its own gas reserves,” he said. “There’s plenty of gas, it just needs
investment, a sensible approach and it could solve vast amounts of problems,
that is the ultimate long-term solution, and it’s not really that long term.”
The passage of a new gas law that is tabled in parliament is
a step in that direction that will, among other things like establish market
rules, reduce exorbitant royalty taxes, said Viktoriya Voytsitska, head of the
legislature’s fuel and energy committee.
Carlos Pascual, senior vice president at IHS energy
consultancy and former U.S. ambassador to Ukraine, said Kyiv is succeeding in reducing
gas dependency from Russia. If Russia several years ago supplied 60 percent of
Ukrainian gas, it now will account for some 10 percent of what the nation
consumes thanks to Ukraine’s pursuit of reverse gas flows from Europe.
He and Taylor both said that cheap oil and gas prices are
here to stay given global trends and the advent of unconventional sources like liquefied
natural gas and shale gas. Pascual touted the merits of energy efficiency,
especially about the ways that it could be incentivized and transformed into a
bankable asset once market energy prices are established.
Ukraine must find its place in the world’s and Europe’s new
energy mix, Pasual said. “It must find out what pipelines are needed, to take
action and stimulate its own production of gas,” he added.
“Increasing price will create incentive. The reason efficiency
spreads is because banks and others, such as municipalities could make money”
from selling bonds for energy efficiency projects while harnessing the money saved
from them in the long term, he said.
Former Polish Foreign Minister and current member of
parliament Radoslaw Sikorski noted how energy inefficient Ukraine is pointing
out that it uses three times more energy than the European average to produce
one unit of gross domestic product.
“The fundamental issue for Ukraine is not just the relationship
of (gas) supply and transit. Ukraine has earned its transit fees. The fundamental
issue is energy efficiency of the economy as a whole,” he said
Also urging more focus on drawing on domestic competitive
advantages was Maxim Timchenko, CEO of DTEK, the energy conglomerate holding
company of Ukraine’s richest billionaire Rinat Akhmetov.
He said three factors play into Ukraine’s long-term energy
security perspective. Kyiv must rely more on national companies and ensure that
the rule of law prevails and install a level playing field. Third Ukraine must
establish fair taxes.
“Ukrainian companies should be the drivers of the economy…it’s
hard to talk about investors, about foreign companies when there isn’t a level
playing field…all of this should be taken into account,” Timchenko said.
Referring to Russia and Ukraine’s other energy security
challenges, Sikorski said: “Ukraine is a major producer of gas, it should be
self-sufficient and then the political issue would disappear.”
Kyiv Post editor Mark
Rachkevych can be reached at [email protected].
