Searching for gas partners

Listening to representatives of the Ukrainian government one might have an impression that nearly all the energy problems in the country have been resolved. In his recent interview to Bloomberg Agency the Ukrainian Minister of Fuel and Energy Yurii Boiko declared, in particular, that there is an agreement to buy natural gas at the spot market from RWE AG, the second largest German energy company, able to provide Ukraine with approximately 5 billion cubic meters of gas. Boiko also added that Ukraine is now negotiating the possibility of buying natural gas from the US and Qatar.

Another option is importing natural gas from Turkmenistan that can also offer about 5 billion cubic meters of gas per year as a pay for infrastructure projects. However, according to Boiko, this agreement will need the permission to use Russian pipelines. In addition, Boiko emphasized that the main Ukraine’s priority on the way of increasing its energy independence is the development of its own gas production, in particular by involving foreign investors. “The number-one priority is to develop our own gas production,” the minister claimed.

It is true that Royal Dutch Shell Plc and Chevron Corp have already been granted the right to extract hydrocarbons in Ukraine. The licenses to develop Skifska and Foroska offshore fields in the Black Sea have been offered for a competition which will give Ukraine an opportunity to decrease its dependence from Russian import and involve the international help. It looks like the current minister is leading the Ukrainian energy in the right strategic direction. The activity of the government does not even provoke any major complaints from the opposition.

However, experts can see more in it. “Although late, oligarchs’ instinct of self preservation went off,” director of energy programs at NOMOS Center Mykhailo HONCHAR noted in his interview to UNIAN. “This explains officials’ hyperactivity since they serve the Ukrainian oligarchs. All of them are saving their bacon trying not to become victims of the Russian predator. It is their main motive.”

According to Honchar, Ukraine is unlikely to receive the awaited status of the energy self-sufficient state before 2020. “If we get an extra billion cubic meters of gas before this time, we will certainly benefit from it but it will not solve the problem,” the expert opines. “If we get a regasifying terminal to receive the condensed gas in 2016, we will also benefit. However, it will not solve the problem. The new quality cannot be achieved through spontaneous actions. It is the result of actions that have to be consequent, systematic, and aiming at synergy.”

According to Honchar, the government realized that it cannot stay face-to-face with the heavyweight partner. This cooperation is unlikely to be profitable. Honchar opines that Ukraine should involve powerful players that could strengthen our position and balance the negative energetic and political influence from the East. “However, it is too much early for success reports since we have just left the zero stage,” Honchar believes. “Tendering has finished, however, the major responsible event which is signing the agreement for produce distribution that will make basis for Ukraine’s cooperation with foreign investors for the next 50 years is ahead. If the officials hurry to share bonuses and the agreement about produce distribution has not been signed, they are trying to catch a pie in the sky,” the expert emphasized.