NJSC Naftogaz of Ukraine considers the existing mechanism of building and using natural gas safety stocks lagging behind the gas market development, especially since the introduction of the Law of Ukraine “On the Natural Gas Market”, and proposes to introduce changes to the mechanism.
With active assistance of Naftogaz and in line with the best practices of EU member states, regulatory acts on imposing special obligations on gas market players and on security of supplies have been developed and adopted.
These documents already now allow a more purposeful use of gas safety stocks to ensure security of supplies, in particular, they can safeguard gas supply for protected consumers (households, district heating companies and socially important facilities) in the event of unexpected supply interruptions.
Therefore, Naftogaz considers that the responsibility for building gas safety stock can now be imposed only on suppliers of protected consumers, and the volume of required safety stock is to be calculated by the Ministry of Energy and Coal Industry on the basis of an analysis of existing risks of supply interruption.
At the same time, given the high credit risks of gas market players, the current model of relations in the gas market envisaged in regulatory acts pursuant to the Law of Ukraine “On the Natural Gas Market” creates significant financial risk for the TSO, Ukrtransgaz. These risks are associated with its core business – provision of transmission services, particularly the service of commercial balancing.
Taking into consideration the systemic effect of the TSO activities and international best practices, the financial guarantees of the customers of the transmission services (producers, importers, traders, suppliers, consumers) should adequately account for these risks.
The guarantee should reflect appropriately the level of risk assumed with each customer.
In order to eliminate subjectivity in assessing the risks, a transparent risk classification methodology should be established, and on its basis a differentiated guarantee levels determined. For instance, the guarantee requirements for a production company with sustainable production rate or for an industrial consumer with stable operations cannot equal that for a supplier with practically no assets.
Taking the aforementioned into consideration, Naftogaz and Ukrtransgaz propose:
1) amending the Resolution of the Cabinet of Ministers of Ukraine №795 of 30.09.2015 “On Approval of the Procedure of Building Natural Gas Safety Stocks”, setting an obligation to build safety stock exclusively for the needs of protected consumers as defined in the Law of Ukraine “On the Natural Gas Market” and Rules on Security of Natural Gas Supply approved by the Ministry of Energy and Coal Industry of Ukraine.
2) amending the Gas Transmission System Code to establish a differential approach to financial guarantee requirements depending on risk level of customers of transmission services.
Naftogaz calls on all market entities to support the above initiatives.