Davos discussion: Gazprom was the biggest driver of gas market reform in Ukraine

A panel discussion entitled "Ukraine as a Cornerstone: Creating an Integrated Gas Market in Europe" has taken place within the framework of the World Economic Forum in Davos

A panel discussion entitled "Ukraine as a Cornerstone: Creating an Integrated Gas Market in Europe" has taken place within the framework of the World Economic Forum in Davos.

The event was attended by Director of the EU Energy Community Secretariat Janez Kopaи, Director of the Atlantic Council’s Eurasia Center John Herbst, and Naftogaz CEO Andriy Kobolyev.

Commenting on the progress of energy reforms in Ukraine, Janez Kopaи noted that Gazprom, with its extremely tough policy, had become the biggest driver of reforms.

Andriy Kobolyev in turn commented that the new Naftogaz contract with Gazprom had eliminated certain disproportions and allowed the removal of bottlenecks with European neighbors. Ukraine, Hungary, Poland and Slovakia can now freely exchange gas flows through Ukrainian territory.

“Last year, we made every effort to make sure we were prepared for a potential crisis. At the end of the day, an acceptable compromise was found and signed. Ensuring a new transit contract was extremely important for Europe,” Andriy Kobolyev said.

John Herbst further highlighted that the Nord Stream 2 pipeline project gave Russia the opportunity to blackmail the countries of Eastern Europe, much as it had done in the past. According to Herbst, Nord Stream 2 has now been delayed by at least two years thanks to joint efforts in this direction.

Herbst believes that increased LNG supply would maintain competition on the European market. He also added that in the long-term, it was highly likely that US LNG would come to Ukraine. “LNG is a factor towards price decreases, not increases. The fact that LNG competes is good for European consumers,” Andriy Kobolyev emphasized.

Participants devoted much attention to the future of Ukrainian energy reforms, including corporate governance reform at Naftogaz.

According to Kobolyev, corporate governance reform must continue. Last year, there were many interventions from the previous government, while the new government plans to introduce OECD compliant charters for SOEs, which would prevent a continuation of this meddling.

“The natural gas sector in Ukraine is an extraordinary success story. This was the place where two great crises confronting Ukraine back in 2014, namely Kremlin aggression and corruption, came together. The extraordinary success of Naftogaz and Mr. Kobolyev and his team to turn a huge asset diversion, actually a ground zero of corruption in Ukraine, into a contribution to the Ukrainian budget, and to remove Ukrainian dependence on the Kremlin, was absolutely essential. The biggest opportunity for Ukraine now is to complete the already extraordinary reforms in the gas sector. We’ve seen this with price reform, now we see it with unbundling. The biggest risks remain connected to the Kremlin’s efforts to politicize gas supply,” former US Ambassador to Ukraine John Herbst stated.

Please click here to watch the full video of the panel discussion.

Communications Department
NJSC Naftogaz of Ukraine

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