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  • Law on unbundling: why it is necessary to separate the gas transmission system and how it will affect the Ukrainian market
    Ministry of Energy and Environmental Protection of Ukraine, posted 01 November 2019 11:15

    The Verkhovna Rada voted for the bill # 2239-1 on the unbundling of Naftogaz of Ukraine as whole. 341 MPs voted in support of the decision.

    In two months - starting January 1, 2020 - Ukraine plans to sign a new long-term contract for the deliveries of Russian gas to Europe, as well as the establishment of a new company that will engage in transit activities and deliver gas to consumers. The success of the conclusion of the transit agreement depends on whether the Naftogaz unbundling is completed.

    Why is it critical to separate the operation of the gas transmission system?

    As part of the arrangements with the European Energy Community, Ukraine pledged to separate the operation of gas transmission and distribution systems from production and supply activities. Currently, these functions are performed by the companies being companies of Naftogaz of Ukraine Group. In compliance with the Third Energy Package of the European Union, Ukraine must create an independent gas transmission system (GTS) operator.

    What impact will unbundling have on the Ukrainian market?

    The document reads that after the separation of gas transmission functions from its production and supply activities, the CMU's influence on the Ministry, which will become the subject of management of the GTS operator, will be curbed in matters of managing the corporate rights of the GTS operator. Certification of the GTS operator will be the proof of its compliance with the requirements of the European legislation.

    By the way, the bill was developed in synergy with the Energy Community Secretariat, which is the entity that will assess the conformity of Ukrainian law with the European legislation in matters of certification of the GTS operator.

    What is our scenario for implementing the document?

    Establishment and certification of a GTS operator that will comply with European energy legislation. The new GTS operator will gain independence not only from the current owner - Naftogaz, but also from any other influences on the part of producers and suppliers of natural gas, in particular through the vertical of state authorities.

    That will allow, on the one hand, to foster the development of a transparent and competitive gas market and, on the other, to ensure the sustainable and smooth operation of gas transmission activities for both internal and external customers.

    More on unbundling in the EU here