250 is the upper limit

The crisis in Ukraine-Russia relations, which arose after an abortive attempt to thrust on our country both an unacceptable gas draft and a simultaneous ratification, will most probably last until the presidential elections in Russia. It is yet unclear if this “clash of interests” (as Ukraine’s President Viktor Yanukovych dubbed this situation) will settle. It must have been for a reason that he reminded us of a phrase by a “certain well-known politician”: “You can’t sleep peacefully next to a bear.” Yanykovych emphasizes that complicated gas talks lie ahead, and the result is very hard to predict. “I’m convinced [of only one thing? – Author] that we will meet in March,” remarks the president. Besides, he justly believes that the fair price for Russian gas for Ukraine should be the European price minus the transit costs across Ukraine’s territory, 240 or 250 dollars being “the upper limit.” Last Saturday, speaking on one of the TV channels, Yanukovych specified that should the new price negotiations fail, Ukraine would keep cutting down on gas consumption.

Ukraine’s doggedness certainly deserves to be punished, by all neo-imperial standards. Russia threatens to even stop transporting its gas via Ukraine’s territory. “No doubt the significance of Ukraine’s gas transmission system for the EU and all of the continent of Europe should be preserved,” believes Isaac Valero-Ladron, a spokesman for the European Commission. “The Ukrainian GTS is the main gas thoroughfare to transport Russian gas to Europe.” He also gives a piece of good advice to our country, too: “Ukraine, with its unique geographical location, is capable of not only transmitting gas, but also mining and storing it, which also means an opportunity of more flexible offers on Ukraine’s part concerning gas transportation.” Valero-Ladron believes that Ukraine needs to develop a long-term strategy in order to remain a reliable and competitive player in the business of gas transportation.

However, such tips are obviously not enough. Under any circumstances Russia is bound to remain a leading, powerful and, alas, aggressive player on the gas market. It is up to Ukraine to prove that words are inevitably followed by actions. How can we do this? For instance, Russia was badly offended by Ukraine’s intention to considerably curtail the purchasing of Russian gas. We need other convincing (or better still, irrefutable) arguments, which will make our counterparts in the talks realize both immediate and long-term consequences of their policy.

Late last week Ukraine flew several trial balloons in that direction. The State Agency for Geology and Resources announced a contest to participate in the agreement on distribution of the production in the Yuzivka (Kharkiv and Donetsk oblasts) and Olesko (Lviv and Ivano-Frankivsk oblasts) gas fields. The minimum necessary investments for the prospecting of these fields will total up to 2.9 billion hryvnias.

Simultaneously, the State Agency for Geology and Resources, jointly with NJSC Nadra Ukrainy created the Ukrainian Geological, Research and Production Center in Poltava. The Center has unique equipment and an up-to-date laboratory to examine geological material, and will cooperate with all leading global companies. According to its director general Petro Holub, one of the Center’s key missions will be the estimation of the prospects of shale gas production in Ukraine. “We reckon that eastern Ukraine possesses shale gas deposits of nearly 9.4 trillion cubic meters. We can start mining our first shale gas in three or four years,” believes Holub.

This and other ambitious projects will doubtlessly consolidate the country’s energy security. Adequate attention must also be given to the practical implementation of Ukraine’s obligations to its European partners: restructuring of the National Joint Stock Company Naftohaz Ukrainy via singling out the main transmission network and terminals, assigning the functions in gas mining, supplying, and transporting, and the liberalization of gas market (enabling each consumer to choose their supplier).

By all appearances, such changes may have taken place already by the beginning of this summer. Today the to-do list includes a law on reforming Naftohaz, which enables Ukraine to become a true member of the European Energy Community.