Ukraine has completed the process of separating its gas production company from its gas distribution network, Andriy Kobolyev, the CEO of state energy company Naftogaz announced on Jan. 1 on his Facebook page.
Naftogaz and the transmission system operator will now be separate entities working independently of one another.
Widely known as “unbundling,” the move brings Ukraine further in line with the European Union’s Third Energy Package and satisfies a key demand of one of the country’s donors, the International Monetary Fund (IMF).
A new state company known as Operator GTS Ukrainy will now carry out gas transmission in Ukraine, the operator said in a press release.
The company was registered in 2019. Starting on Jan. 1, it replaced Naftogaz subsidiary Ukrtransgaz as the operator of the country’s gas transmission system, the Hromadske news site reported.
After its creation, Operator GTS Ukrainy acquired state-owned infrastructure for gas transmission. The company was then transferred to state company Trunk Gas Pipes of Ukraine, which is owned by the Ministry of Finance. As a result, the ministry now controls Operator GTS Ukrainy.
A complicated political accomplishment, unbundling was approved by Naftogaz, the State Property Fund, the Ministry of Economy, the Ministry of Finance and the Ministry of Energy. It will affect gas volumes worth Hr 32 billion (over $1.3 billion).
Although Naftogaz is not a shareholder in Operator GTS Ukrainy, it is still the company’s biggest client. For this reason, Naftogaz “will continue to support it,” Kobolyev said.
Long-time coming
Unbundling the gas system was a long-await reform critical to Ukraine’s greater integration with the European Union.
The Ukrainian government adopted a new gas market law in April 2015. It came into force half a year later in October.
The law was a key precondition for further IMF financial assistance to Ukraine. It created the foundation for a competitive gas market in Ukraine and provided for the full alignment of Ukraine’s energy system with the EU’s Third Energy Package.
The Third Energy Package is a series of laws aimed at increasing the efficiency of the energy market and creating a single market for gas and electricity in the EU.
It states that no supply or production company can hold a majority share of a transmission system operator, that energy supply companies must leave transmission to an independent firm and that all “important decisions must be taken independently of the parent company.”
Introduced in 2009, the Third Energy Package was created to address monopoly issues. A single company generating energy and operating a transmission network at the same time might block competitors’ access to infrastructure and prevent fair competition. That, in turn, would lead to higher prices for consumers, according to the EU.
New year, new breakthrough
Despite the importance of unbundling and the IMF’s long insistence on its implementation, Ukrainian authorities long-delayed the procedure.
In 2018, Naftogaz Executive Director Yuriy Vitrenko told the Kyiv Post that unbundling would be impossible without amending the state energy company’s gas transit contract with its Russian counterpart, Gazprom. Russia would not agree to that, he said.
Unsurprisingly, the announcement of unbundling’s completion followed another milestone development: In the early morning hours of Dec. 31, Naftogaz signed a new transit agreement with Gazprom.
The deal came in the nick of time. The previous agreement was scheduled to expire that very day.
Just one day later, that agreement was already in effect. On Jan. 1, Operator GTS Ukrainy announced on Facebook that it had shipped the first cubic meters of Russian gas to the European Union under the new gas transit contract.
