Page 5 - FSUOGM Week 17 2021

FSUOGM COMMENTARY FSUOGM

to 80% of its gas as late as 1970. Sergiy Makogon, CEO of
Since then, Europe has diversified its energy GTSOU.
supplies, as following the collapse of the Soviet
Union demand has risen, but there have been
rising concerns about Europe’s dependence on
Russian gas following several “gas wars” in the
noughties where the EU found its gas supplies
briefly cut in depths of winter.
Today the GTSO manages hundreds of kilo-
metres of pipelines that transit Russian gas on
its way to European clients. There are four main
pipelines that can carry 146bn cubic metres of
gas a year, the equivalent of between two thirds
and three quarters of all of Europe’s imports of
Russian gas.
However, since relations with Russia soured
following the 2014 annexation of Crimea the
amount of Russian transit gas has fallen dra-
matically. Under the terms of a new transit deal
signed at the last minute in December 2019 Rus-
sia was contracted to send at least 40 bcm of gas
via Ukraine, but due to the cold winter actually the top tier of the Ukrainian government as well
sent 55 bcm. And going forward it is contracted as Russian officials and the leaders of Gazprom.
to send 35 bcm in the next two years on a take- Those scams have been closed down many years
or-pay basis. ago, but the sector still suffers from some of these
The unbundling of the gas business has cre- problems. However, the entry of hundreds of
ated an open and transparent market for gas that independent gas traders has been the key to the
has at a stroke gone a long way to ending the cor- success of the reform.
ruption and distortions of the business that had “There are more than 900 companies work-
long been a feeding trough for the oligarchs. The ing on our market. All the big European gas
reforms are not finished, but the heavy lifting has traders are here and 100 companies are involved
already been done. in importing gas to Ukraine,” says Makogon.
“We completely independent from Naftogaz, “European traders already account for tens of
although of course we work closely with them. billions of cubic metres of gas imports to Ukraine
We are certified by all the relevant European – it's a huge amount.”
authorities and 84% compliant with the EU gas The sheer number of players means that the
network codes, so there is still some work to do. old school corrupt deals are almst impossible to
But we are already one of the biggest gas transit do any more. There are simply too many players
companies in Europe,” says Makogon. offering better deals.
Most of this gas trading is aimed at industrial
Energising reforms customers, as the retail gas business has not been
Ukraine has been quietly restructuring its energy completely freed but is the focus of the current
business to put it on a transparent market-based round of reforms. Companies now have a wide
footing and a lot of progress has already been choice to potential suppliers and are paying rates
made. The power market has also been over- that are set by an open market.
hauled but there have been a lot more problems
there, as the government has been struggling to Retail reforms
pay $1bn it owes to the producers of renewable In August this year a new law will come into
energy that have set up in the last few years. But effect that will open the retail sector up to com-
the gas business transformation has gone a lot petition too. Consumers will be able to choose
more smoothly. to buy their gas from any supplier they want and
The unbundling is complete but the one big those that can’t afford to pay their utilities bill will
piece still missing is a gas market exchange for get help from the government under the Public
trading contracts, says Makogon. “We have an Services Obligation.
exchange, but it is not up to EU standards. How- “The main goal of the reform is to lower
ever, there is already settlement and clearing of prices for households. At the same time, for
deals but more needs to be done.” those that can’t afford gas there will be subsi-
The old system was tightly controlled by a dies to help so that people can pay as much as
few players. Dmytro Firtash is probably the best they can and the state will help with the rest,’
known of the oligarchs who were big players in says Makogon.
the gas business and still controls companies Paying for gas is a politically sensitive issue.
that account for 80% of the delivery of gas to The Soviets used to supply gas, power and heat-
households. ing to the entire population for free and many
He also set up a string of unnecessary inter- still regard utilities as something the state should
mediate trading companies to handle the tran- provide and not something they should pay for.
sit of gas from Russia to Europe that skimmed The International Monetary Fund (IMF) insisted
billions of dollars off the top to enrich those in that the heavily subsidised domestic energy

Week 17 28•April•2021 www. NEWSBASE .com P5