Ukraine: new procedure for access to the gas transportation system

Ukraine

On 19 April 2012 the National Commission on State Regulation of the Energy Sector of Ukraine (“NERC”) adopted Resolution No 420 “On Adoption of the Procedure for Granting Access to the Unified Gas Transportation System of Ukraine” (the “Procedure”).

The Procedure is aimed at liberalising the Ukrainian natural gas market and it provides a detailed mechanism to ensure non-discriminatory access by those operating in the market to the Ukrainian gas transportation system (“GTS”). The Procedure envisages that any of the gas market players (i.e. state-owned or private legal entities or individual entrepreneurs engaged in the production, transportation, distribution, storage and/or supply of gas, as well as consumers of natural gas as a raw material or fuel (excluding the wider population), hereinafter the “Market Players”) may obtain access to the GTS from an operator thereof, which (according to the Procedure) is the state oil and gas monopoly – NAK “Naftogaz of Ukraine” (the “Operator”).

The most important provisions of the Procedure are as follows:

  • Access to the GTS allows the applicants to receive the following services from the Operator: (i) gas transportation; (ii) gas distribution; (iii) gas pumping into/out of underground storage facilities; (iv) gas storage; (v) connection to the GTS.

  • Each Market Player must be included into the List of the Natural Gas Market Players (the “List”) in order to enjoy access to the GTS. The List will be publicly available (to be updated by the Operator twice a year) and include the following information: (i) list of each Market Player’s entry and exit points on the GTS; (ii) list of the natural gas owners, distributors, producers, transporters etc.; (iii) list of the wholesale consumers.

  • A Market Player can be excluded from the List by the Operator if (i) the Market Player has not notified the Operator about a change of certain information provided to the latter (e.g. registration data, description of the activities conducted on the gas market etc.); (ii) the Market Player has not performed any operations on the gas market for three years.

  • Market Players will enjoy free and equal access to the GTS, however, should there not be enough capacity to satisfy the demand of Market Players, the priority will be given to: (i) Market Players who supply gas to the population and budget-funded companies/organisations or to companies supplying heat to the aforementioned categories of consumers; (ii) Market Players who booked the GTS’s capacity for the longest period of time. The remaining GTS capacity is distributed evenly between all other Market Players.

  • The Procedure also contains a detailed description of the mechanism for granting access to the main and distribution pipelines, as well as to underground gas storage facilities. The Market Players intending to enjoy such services will need to enter into contracts with the relevant gas transportation company or local gas distributor (either of which may not unreasonably refuse to sign such contracts).

  • The Procedure also establishes a mechanism for connection to the GTS consisting of the following stages: (i) execution of the connection agreement (the technical conditions for such connection are to be attached thereto); (ii) development of the project design documentation; (iii) construction and installation works; (iv) commissioning of the new pipeline(s); (v) connection to the GTS; (vi) release of the natural gas.

  • The capacity of GTS may be increased (by means of construction of new pipelines or modernisation of the existing ones) at the expense of the customer(s).

  • The Procedure pays careful attention to ensuring that a balanced use of the GTS is achieved through (i) physical balancing (maintaining the proper pressure during the intake and distribution of natural gas), (ii) commercial balancing (withdrawal or pumping of gas into the underground storage facilities by its distributors in case of gas shortage/surplus) or (iii) substitution of natural gas (due to transportation concerns or in cases of commercial balancing).

LAW: Resolution No 420 of the National Commission on State Regulation of the Energy Sector of Ukraine “On Adoption of the Procedure for Granting Access to the Unified Gas Transportation System of Ukraine” dated 19 April 2012.