Remarks by Prime Minister of Ukraine Arseniy Yatsenyuk at a session of the Government on October 22, 2014

Yatsenyuk A.P.: Dear members of the Government! Dear representatives of mass media! Dear heads of regions!

Today we will discuss energy issues, the issue of providing people with heat and light. I would like to hear reports, first of all, of NJSC "Naftogaz Ukrainy" as the main and the single company that provides Ukrainians and utility natural companies with natural gas.

Also I would like to hear a report of NJSC "Energoatom" about providing Ukrainians with electricity, as well as of the Ministry of Energy and Coal Industry on the availability of coal and the possibility to pass through the heating season.

First of all, it’s about natural gas. Our storages possess about 17 billion cubic meters of gas. We receive the reverse supply from the countries - members of European Union. An interim agreement with Russia hasn’t been signed yet, following talks will be held on 29 October. In this case, I would note that the Stockholm arbitration court accepted our additional claim to issue an interim judgment in the case between Naftogaz and Gazprom.

We still have two ways for solving the gas problem.

The first way is to sign an interim agreement, which we have worked out together with our European partners. Yesterday, a Ukrainian government delegation was in Brussels and along with EU Commissioner Oettinger we clearly expressed a common stand between Ukraine and the EU and we are waiting for an answer from the Russian side.

The second way, triggered by the Ukrainian side a few months ago, is a variant of judicial resolution of the dispute. The court may set an interim price as well as payment and natural gas supply.

We need additional 5 billion cubic meters of gas, which we can buy in Russia. I am rather skeptical as regards the fact that we can rebuild our relations with Russia, but we’ll see how things develop on 29 October.

As to additional gas volumes, these volumes of gas we can get through the increase of reverse supplies. We are working with our European partners so as to increase the current technical ability. So we have backup options, including additional gas supplies from the EU.

Also we need to prepare for emergencies. And the way out of the emergency will be the supply of fuel oil for utility companies. We now have the opportunity to recycle oil, as well, we can supply up to 200,000 tons of fuel oil in case of urgent necessity or in the case of an emergency at the enterprises.

I’d like to single out an issue of payments for the supply of natural gas.

The situation with payments for natural gas tends to worsen, and, you know, no money, no gas.

Now the Government has allocated UAH 7 billion to compensate for the difference in gas rates. I mean we are to fund directly from the Budget the difference in the tariffs. I am well aware the problems exist in the system of payments, but I ask everyone to realize your responsibility for making payments for the natural gas provided by utility companies. Our calculations: if in 2012 we have covered 80% of the payments, in 2014 we have hardly completed 50%.

The Government has allotted UAH 7 billion to compensate for the difference in gas rates, currently the payments are being made through the local budgets. And I demand to settle an order in the system of payments. The largest debtor in gas payments is Donetsk region: around UAH 4 billion. Donetsk region owes to NJSC Naftogaz, Luhansk owes UAH 1.2 billion. And only throughout 2014 an additional debt from these two areas has increased by over UAH 1 billion.

Moreover, I ask Naftogaz to provide relevant information regarding payments for natural gas in other areas in order to stir up and improve the system of payments.

Now about electricity, what we’ve managed to achieve. And regarding this issue I will say that it is in principle work that for the last six months we have been doing correctly.

We have significantly raised the amount of electricity generation of Energoatom. That is, we have turned on everything that we could, we have increased by 17% the production of electricity generated by Energoatom.

Secondly, we’ve managed to raise by more than 30% the amount of electricity produced by the so-called alternative energy.

These are two major steps to ensure energy independence and diversification of energy supply sources. 

Regarding coal, the situation remains difficult, according to our estimates, by the end of this year we need in addition about 4 million tons of coal. Today, we are to get the information the first batch of coal in the amount of 84 thousand tons. As far as I know, today it has already passed the Bosphorus.

We bought this coal in South Africa. Of course, the price is much higher than that which we received from Donetsk and Luhansk regions, namely, if we have received our coal. But it is clear that Russian terrorists have deliberately bombed railways, mines so as to create a danger for Ukraine's energy independence.

Therefore, we are diversifying supply and do our utmost to avert a critical situation in the electricity market and provide Ukrainian thermal power plants with coal.

Finally, the National Energy Regulatory Commission has adopted a decision to provide utility companies and thus energy companies generating electricity with financial resources. The Government insisted on the reduction of subsidies for so-called "green" power plants named by former Vice Prime Minister in the Azarov’s Government. We have achieved these things. And it is good that the Commission has adopted a decision. This will enable us to provide additional financial resources for the purchase of coal to Ukrainian companies that generate electricity.

Speaking about the report I have received, we have 100% readiness to turn on the heating. According to the data six regions have already started the heating season. I want to warn everyone: from October 26 the temperature regime will drop to “minus”. All over Ukraine, according to Gidrometcentr, an average temperature will be below minus 8 C. It means, apart from the six regions, all the rest of the regions must turn on the heating.

You are technically ready. We have provided you with gas. Even despite the fact that the payments for natural gas haven’t been made, the Government has planned to subsidize from the central budget and has transferred funds to ensure Naftogaz could supply gas. Peculiar attention should be paid to hospitals, kindergardens, schools. Here we need more thorough control by the heads of regional state administrations, heads of districts, to ensure technical side of the heating season.

I want to repeat and appeal to the leaders of Naftogaz: despite the fact we have debts, we have allotted from the state budget to compensate for the difference in rates. I ask to make relevant financial calculations, to pay off all possible debts that you have, and even despite the fact that not all the debts have been covered, to supply natural gas in order to ensure the heating season.

I appeal to the heads of regional administrations once again: to actually improve the fiscal discipline, to improve significantly.

I also appeal to the heads of state monopolies: over the past six months we'll have taken a number of important decisions aimed at energy independence. As for the company Energoatom, we’ve increased the investment component for you and you face a task to complete the construction of new nuclear units.

Let me remind you that such construction should be carried out in a short time and with involving of only our European partners. As far as I know, you reported to me that we are to have a contract not with Russia, but with the Czech Republic, with Skoda.

Regarding energy saving, the Government has taken a number of decisions to replace boilers. According to data, about 700 boilers have already been changed from gas to alternative sources. I ask the Finance Ministry to expedite the allocation of funds to reduce as much as possible energy dependence on gas. Granules, electric boilers - this is what will give us the opportunity to really achieve the energy independence, as well as reduce our dependence on Russia.

I would like to speak about the situation with the regional gas companies. With regard to the regional gas companies in private ownership - special verification of payments for the consumed natural gas via the regional gas companies. And it turns out such a story: people have paid for gas, money have been transferred to the regional gas companies, however NJSC Naftogaz of Ukraine has failed to receive it.

That is why we have introduced special accounts for payments for the consumed natural gas. All the money that was paid [on accounts], have to go directly to the NJSC Naftogaz of Ukraine for the purchase of imported natural gas, instead of being distributed among oligarchs who supervise regional gas companies. After our decision on introduction of special accounts in the area of utility services and gas – a thorough control and each hryvnia that is paid for gas must get to Naftogaz. Naftogaz has to convert it and purchase new amounts of natural gas.

Dear colleagues! I would like to reiterate the need to provide people with heating and electricity. Over the last six months, the Government has done its utmost in extreme conditions: for the first time over the years of Ukrainian independence the Russian Federation cut off the gas supplies for four months, and for the first time, we couldn’t deliver our own coal from our territories to our thermal power plants as well as electric power stations. So, the situation is complex, but everyone has his/her own responsibility and task. We are coping with our tasks in these rather difficult circumstances.

The Government has found UAH 7 billion, aimed at covering the difference in fees, and I ask you to complete calculations.

Moreover, I emphasize the need for payments for the consumed natural gas, the quality of financial discipline as well as savings. In these tough times, dear friends, saving use of energy resources will allow to save money, will allow us to more easily pass the heating season and winter.

We’ve reduced the consumption of natural gas by 17%. Considerable funds have been invested in the upgrading and replacement of gas boilers to other fuels. It is also good, but not enough.

As for coal, then, as I have already mentioned, we have to purchase an additionally 4 million tons. So, I give an order to the Ministry of Energy and Coal Industry along with the National Energy and Utilities Regulatory Commission to keep on seeking solutions so as to ensure the acquisition of coal and provision of energy balance.

I ask the heads of the regions to not only perfectly make reports on how everything is turned on. Give orders to your staff to check selectively facilities of healthcare, education, social infrastructure.

We have allocated extra UAH 0.5 billion from the state budget for energy efficiency for state and municipal enterprises, i.e. to replace boilers. Even despite the fact that the heating season has actually begun, do not leave this work. I urge to spend all the money completely and purchase new boilers, reduce gas consumption and switch to other alternative sources.

I am going to inform everyone about the further negotiations on the purchase of additional volumes of natural gas and I reiterate that in order to buy gas, we need to have money, thus, to have money, we need to collect them. To collect them from utility companies and regional gas companies. This is the personal responsibility of all the heads of administrations and all services responsible for energy supply in the country.

I thank the media!