Russia and Ukraine may deal with Ukrainian gas pipelines on their own
27.05.2010 (15:21) | Analytical department of RIA RosBusinessConsulting
Ukraine’s gas transit system may be revamped without Europe’s help.As RBC Daily has learned, the modernization, and hence further management of the Ukrainian pipes, will be handled by a joint venture of Gazprom and Naftogaz of Ukraine. President of the Russian Gas Society Valery Yazev later confirmed the information, noting that the trilateral consortium’s future management of the gas transit system hinged on the outcome of the joint venture talks.
The three-party consortium including Russia, Ukraine and Europe will most likely never materialize. A source close to the Russian-Ukrainian joint venture talks told RBC Daily that Gazprom’s share in the venture depended on the assets it would contribute.
Speaking at the conference “Energy Dialogue: Russia-The European Union. Gas Aspects” in Berlin, Yazev acknowledged the possibility, adding that the Russian-Ukrainian talks were still at an early stage. “Depending on the configuration they end up with, it will be more clear whether they should return to the idea of an international consortium or not,” Yazev explained.
In the expert’s estimation, Naftogaz’s capitalization is currently close to $17bn, while that of Gazprom is a whopping $170bn. The Russian gas giant is likely to contribute a certain asset – for instance, a gas production asset worth some $15bn-17bn – to the joint venture. Naftogaz’s chief Yevgeny Bakulin refused to name any specific assets that are likely to wind up in the joint venture, arguing that the issue was still being negotiated. Gazprom declined to comment on the matter as well.
Verkhovna Rada MP and leader of the Front for Change party Arseny Yatsenyuk also acknowledged the possibility of consolidating Ukrainian pipes and Russian gas fields in a joint venture. A Ukrainian TV channel quoted him as saying that if Russia contributed gas fields, Ukraine could offer a transit pipeline. ‘This is about partnership,” he stressed. That the consortium idea will be abandoned is more than likely, according to independent expert and former Naftogaz officer Valentin Zemlyansky. It should not be ruled out, however, that some large foreign energy company will also get a stake in the new joint venture, which is exactly what happened with the SPV set up to implement the Nord Stream project.
It is quite possible that the gas transit system’s modernization and management will be delegated to a joint venture, as there have already been similar cases in Poland, Slovakia and Belarus, Director of the International Institute of Political Expertise Yevnegy Minchenko said. Chances are, the European Union will not object to a no-consortium situation, since it would save it the investment involved. And what Europe really needs is not an asset, but reliable transit. This will give Gazprom a free hand in shaping its own policy.
Meanwhile, Ukrainian authorities are quite unpredictable. As Minchenko noted, should Russian-Ukrainian relations deteriorate, Europe’s involvement would provide an additional force to balance the gas transit system. Yet, judging from the confidential relations between Naftogaz and Gazprom’s CEOs, Yury Boyko and Alexei Miller, it will take Russia and Ukraine less time to settle the issue without Europe’s involvement.
The idea of a gas transit consortium goes as far back as 2002. In 2003, an SPV was set up, equally owned by Naftogaz and Gazprom. Yet, the project was never completed because of disagreements between the parties. The Russian gas monopoly pressed for managing Ukraine’s entire gas transit system, while Ukraine played for limiting it to two new gas pipelines from Bogorodchany to Uzhgorod and from Novopskovsk to Alexandrov Gai. Early this year, Ukraine’s new authorities suggested going back to the idea of a consortium involving Russia, Ukraine and Europe.
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