The role of Ukrainian gas and oil sector in the EU’s security of energy supply

Speaker: Mr. Oleh Dubyna, The First Deputy Prime-Minister of Ukraine

Mr. Dubyna began this dinner-debate inviting the European Union to consider a stronger energy dialogue with Ukraine, a strategic partner in the field of transit of energy resources to the European countries. The main direction could be a co-ordination and development of energy strategies beginning by transit and energy policies as well as co-operation in the field of improvement of nuclear safety.

The Ukrainian government is trying to keep as principle the liberalisation of the market and the creation of attractive conditions for foreign investment activities. Indeed one notices the Ukrainian efforts to enhance its efficiency : the increase of the industrial production, the reform of the electricity sector, the high capacity of the oil and gas pipelines systems, and the improvement of the energy system which led to the export of Ukrainian electricity to the EU. However the country needs to create an adapted investment environment (through the privatisation of energy assets) and a stable and secure transit of energy resources to the EU. For Mr. Dubyna, the key is co-operation.

He was happy to see that through the years no breakdowns have been registered. Russia has no claims towards Ukraine and the EU hasn’t felt any reduction of supply, even after some accidents of transit such as floods. This proves the reliability of Ukraine that is now ready to increase the volume of transit. The country has enough reserves to increase the natural gas supply and to build an enormous system of gas pipelines. Moreover, there is now a proposal of the biggest Ukrainian network for underground gas storage, which will reinforce the security of supply. Finally, he mentioned the Eurasian Oil Transport Corridor (EOTC), one of the most promising projects for the transport of Caspian oil to Ukraine and further on to other European countries.

Mr. Kopylov carried on with the same main ideas, giving however more precise details and figures. He stressed the deep-seated traditions of Ukraine in the field of oil and natural gas production, which started in the 18th century. He also said that Ukraine’s gas transmission system is the second largest on the continent after Russia’s, with an input capacity of 290 bcm as well as an output capacity of 170 bcm. In addition to this, there is a well-developed oil transport system. Therefore, Ukraine is today not only a gas transmission, but also an important crude oil transport crossroads of Europe. To conclude, Mr. Kopylov invited crude oil owners to participate in an international consortium to be formed for operation of the EOTC Ukrainian part, which key tasks assigned would be to combine the services of the world leading oil and gas companies and international financial bodies.

Several questions and main ideas were raised after the two presentations:
• Need for diversity (due to the globalisation of the risks after September 11) and security of the Energy supply to the EU.
• One cannot talk about the Russian energy without talking about the importance of the transit through Ukraine, the main ” Golden Gate” for gas. Therefore, the EU is in favour with reinforcing the energy and co-operation dialogue with Ukraine. That country has a key role to play in the Caspian area.
• The oil that arrives in Europe is not only used as fuel but also in the industry. Therefore, Ukraine should concentrate more in the production of chemicals and fertilisers in order to add more value to the export products. 
• What are the priorities for Ukraine in order to improve the transit situation? A technological or a financial assistance?
• Has Ukraine done enough to enhance and promote its own industry and production of oil and gas? 
• Ukrainian policy, seen by the Inogate Program as a “silent strategy”. The possible agreement on a project of joined working group (Russia, Ukraine, EU) under the Inogate program. 
• The financial benefits of the transport respectively THROUGH, and not OUT of, Ukraine. Are the transport costs linked to the oil price? 
• If Ukraine is a key transit country and it should remain a reliable partner for the EU on transit, WHY is Ukraine not sitting on the same table when Russia and EU are talking about the future of the Energy co-operation and defining its concrete terms? 
• There is a growing interest of Russia on the Ukrainian Energy market and industry. How should one interpret this move and what changes does it foreshadow it the relation of Ukraine and Russia? What are the consequences for the EU relation with Ukraine?

A possible follow-up of this lively debate could take the form of an EEF delegation visit to Ukraine in 2002.