Energy Community Secretariat sets procedure against Ukraine

Source : 112 Ukraine

The Energy Community Secretariat emphasized that the Naftogaz Ukraine still holds the dominant position of the gas supply in Ukraine
15:43, 6 September 2017

The Energy Community Secretariat addressed a letter ( has the copy of it) to the Ministry of Energy and Coal Industry in which the secretariat informed about the beginning of the procedure on the resolution of the dispute with Ukraine. The dispute is connected with the violation of the liabilities of the Agreement on the foundation of the Energy Community, particularly the 10, 11 articles and the third article of the directive 2009/73/EU according to the document.

‘The market of the natural gas in Ukraine is very concentrated. A few acting participants of the market dominate over it. The law reforms that were started on October 1, 20, 5 by the Ukrainian Law ‘On Market of Natural Gas’  still did not lead to any noticeable shifts  to increase the competition at the wholesale or retail gas market. In practice, both markets are closed for the new participants’, the letter said.

The Energy Community Secretariat emphasized that the Naftogaz Ukraine still holds the dominant position of the gas supply in Ukraine and it is the biggest producer of the gas and the transporter, importer and wholesale trader. Moreover, Naftogaz has the high-priority right on the purchase of the gas from the local producers such as ‘UkrGazVydobuvannya’ and ‘ChernomorNaftoGaz’. Despite the decrease of the share of the state company in the total volume of the gas import in Ukraine to 74% in 2016 (93% in 2015), it remains the leader of the import supplies. ‘Naftogaz controls the transfer of the natural gas cross Ukraine through the sub-company UkrTransGaz, including the transit and the assets of system of gas’s storage.

Naftogaz remains the biggest supplier of the natural gas to the inner market in the total volume of the gas supplies. 70% volume of the sales in 2016 was made by Naftogaz (including the liabilities on the provision of the public services). Naftogaz is the only wholesale gas supplier at the regulated wholesale market (it sales gas to the acting regional suppliers). The major part of the retail market also belongs to Naftogaz as the authorized retail supplier of the natural gas and producer of the heating energy (for all categories of the use of the natural gas, including the produce of the electric energy).

Also, Naftgaz is appointed as the supply of the last hope by the Ukrainian Government, in other words, it is a supplier of the consumers who do not get the natural gas according to the agreements with other suppliers. At the same time, the cases of the fulfillment of the functions of the supplier of the last hope by the Naftogaz are not recorder yet.  

Naftogaz is the only biggest supplier at the unregulated market. The right given to the company that provides the preferential access to the sources of the natural gas, including the natural gas of the local production and imported natural gas that is multiplied by the control of the assets of the transit and storage system and the long-standing connections in the chain of the commercial supply lead to the limitation of the access to the sources of the natural access and the end-consumers for other and new participators of the market in the case of the refusal to involve Naftogaz as the agent’, the letter of the Energy Community Secretariat emphasized.

The conclusions of the Secretariat will serve as the guidelines for Ukraine.

The Energy Community Secretariat and the World Bank demanded from the government to abolish the resolution #187 that imposes the special obligations on Naftogaz Ukraine to supply the gas to the population at the price that is lower than the market price. Also, Secretariat recommends the Ukrainian Government to deprive Naftogaz of the preferences and create the equal terms for access to the gas market for all agents, including the regional gas-distributing networks.

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