‘Energy Union’ arrives at a critical juncture for future of European energy security

At the Energy Union Conference of the EU Energy Ministers that took place in Riga on Friday ...

At the Energy Union Conference of the EU Energy Ministers that took place in Riga on Friday, Miguel Arias Cañete, Commissioner for Climate Action and Energy, highlighted the need for decisive action to avoid dependency of many Member States on a single supplier, Gazprom, which places more than a commercial value on gas, by committing to building infrastructure to bring the gas where it is most needed, especially in eastern Member states.

At the same time, he stressed his plans for strengthening the Energy Community in general, and specifically developing a strategic energy relationship with Ukraine, helping it modernise its energy industry.

Naftogaz of Ukraine fully backs Commissioner Cañete in the above: Ukraine is on a clear path towards further integration with the EU, and so is Naftogaz: over the course of the last year, imports from Russia fell 64%. EU imports however, were sharply on the up, overtaking those from Russia, because the commercial terms are preferable.

The EU and Ukraine are interdependent in terms of energy: as much as 15% of the EU’s imported gas flows through Ukraine. As such, the country adds liquidity and stability to the EU gas market. Ukraine also has the largest gas storage capacity in Europe. Situated in Western Ukraine, close to the EU border, this is easily accessible for European countries to build up a strategic reserve of gas. Ukraine and the EU therefore have all to gain from increasing the strength of their relationship, but to do so, the EU must speak with one single voice.

Indeed, the President of Slovakia, Andrej Kiska, gave an interview this week in which he was quoted saying: “regarding our position toward Russia, it’s extremely important that the EU adheres to a single opinion so that Russia can’t exploit any divisions within the union to break our internal unity.”

Internal unity also applies to the energy market: to enable this, however, one obstacle in particular still needs to be tackled: the obstruction by Gazprom of the virtual and physical reverse flow between Slovakia and Ukraine. Removing this bottleneck would ensure that Ukraine can import all the gas it needs from Europe, at a more competitive price than currently being offered by Russia. This has three clear benefits for the EU. First, it opens up an enormous market for European energy companies to sell into. Second, it means that financial support that has been offered by the international community is not squandered on inflated costs of gas imports from Russia. Third, it significantly increases energy security for those countries in Southeast Europe currently most exposed to potential supply shocks.

“A direct and unobstructed relationship between the neighbouring TSOs would immediately provide Bulgaria, Romania, Hungary, Serbia and other SEE countries with the ability to source as much gas on the Western European market as they need via Ukraine’s gas transmission system”, says Andriy Kobolyev, CEO of Naftogaz, “this would lessen their current high dependence on Russian gas and directly address both these countries’ and the EU’s concerns over what is currently a highly vulnerable energy pocket in Europe”.

Slovakia and the EU can help themselves and Ukraine by ensuring an Energy Union that combines the benefits of all nations together to deliver a solution that secures the continent’s energy security for the future.

With a first meeting with representatives from the South-East Europe region on security of gas supply taking place in Sofia today, Naftogaz underlines its commitment to being a true energy partner for the EU, and continues its close collaboration with the European Commission to have a direct interconnection agreement signed between Ukrainian and Slovak TSOs for all pipelines at this interconnection point.

Background information on Naftogaz:
Naftogaz is the national oil and gas company of Ukraine, which was established in 1998. Headquartered in Kyiv, the company covers a full range of activities in the oil and gas business including: production and refinery; transportation and storage; wholesale trade and distribution as well as technical support. More information can be found at naftogaz-europe.com.

Ukrtransgaz is the leading company engaged in transmission and storage of natural gas in Ukraine. The company is 100% owned by Naftogaz of Ukraine. Ukraine’s gas transmission system transported 132 bcm in 2013, including 86 bcm for the EU and Moldova. Ukrtransgaz owns Europe's largest underground gas storage network, with total capacity of 31 bcm. Daily data on Ukrainian underground gas storage levels is available at transparency.gie.eu. Gas flows information is published at transparency.entsog.eu.

Public Relations Department
National Joint-Stock Company «Naftogaz of Ukraine»

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