Naftogaz welcomes parliament’s adoption of natural gas market law

Naftogaz welcomes the adoption of the Law of Ukraine "On the Natural Gas Market" at today\'s parliamentary meeting.

Naftogaz welcomes the adoption of the Law of Ukraine "On the Natural Gas Market" at today's parliamentary meeting. This is a key document that aligns the Ukrainian natural gas market with the norms defined in the EU’s Third Energy Package.

Naftogaz CEO Andriy Kobolyev commented: "This law is an important step towards Ukraine's integration with the European Union. It transparently opens our natural gas market to investors, stimulates competition and clearly outlines the functions of the State. Importantly, the law also provides State support to vulnerable customers and establishes quality control measures. We are grateful for the efficient cooperation of the Energy Community, Ukraine’s Energy Ministry, the market regulator, and other participants of the working group that developed this document. We also thank the Ukrainian parliament for their support. This is a shared achievement, through which the Ukrainian gas market enters the 21st century.”

Naftogaz Business Development Director Yuriy Vitrenko remarked: "This law creates a properly functioning gas market in Ukraine, based on European best practices, in order to truly protect consumers’ rights. The law’s provisions allow to both achieve optimal prices for consumers and to stimulate domestic gas production through transparent market methods. Naftogaz employed its major experience buying gas on the European market over the past year in its role developing the document. We have proved in practice that the European model allows gas buyers to obtain the best conditions to benefit consumers"

The law "On the Natural Gas Market" was developed in close cooperation with the Energy Community to ensure compliance with the EU’s Third Energy Package. The Ukrainian side of the working group included the Energy Ministry, National Commission for State Energy and Public Utilities Regulation, Naftogaz, Ukrtransgaz, representatives of regional gas pipeline operators, other market participants, NGO “Dixi Group”, as well as representatives of the parliamentary factions. The Energy Community Secretariat is the body responsible for monitoring States’ relevant obligations. Ukraine joined the Energy Community in 2010.

The law "On the Natural Gas Market" establishes an economically sound approach to the organization of the gas market.

1. Separation of the functions of operators, distributors and suppliers

The law introduces mechanisms to prevent anti-competitive practices by gas system operators, distributors and suppliers related to gas storage, distribution systems and LNG development.

The law does not provide for privatization of the gas transportation system operator, which is State-owned.

2. Clear delineation of the State and an independent regulator

The law provides for State regulation of transportation, distribution, storage, installation services, and LNG markets and continuing development of fair competition in the market for natural gas.

Importantly, The law also clearly limits government involvement in the work of the wholesale natural gas market. Thus, wholesaler activity shall not be subject to licensing. Government intervention should be carried out in a non-discriminatory and transparent manner based on common interest such as ensuring the smooth flow of natural gas to consumers and diversification of revenue sources.

3. Free Pricing

Under The law, the wholesale and retail natural gas markets will operate a free pricing principle (unless the Cabinet of Ministers of Ukraine exercises its right to implement special responsibilities).

The law creates the preconditions for a reformed natural gas market, based on the principles of free and fair competition focused on providing a high level of protection to consumers. These mechanisms should enhance competition due to entry of new market players, which in turn will be a driving force for reducing energy prices.

The law is scheduled to take effect from the date of publication, but shall be applicable from October 1, 2015 (except for certain provisions that become effective at a later date). On October 1, 2015, the law “On the Principles of the Natural Gas Market” will be terminated.

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

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