Modern economic POTENTIAL OF UKRAINE

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Gas transportation system

Ukraine is one of the largest gas transit operators in the world. Annual carrying capacity of its gas transportation system is inlet 290 bn cu. m. and outlet almost 170 bn cu. m. – to countries of Western, Central, and Eastern Europe, as well as to southern part of Russia. Around 90% of the total volume of Russian gas export is heading to world markets via Ukraine’s territory.

The gas transportation system (GTS) of Ukraine includes 37.6 ths. km of gas-mains of various uses and productive capacity, 73 compressor plants (CP), more than 1,600 gas distributing stations, 13 underground gas storages (UGS), as well as infrastructure objects that secure the system’s functioning.

The GTS is able to receive up to 290 bn cu. m at the inlet and give 175 bn cu. m of natural gas at the outlet, including 140 bn cu. m directed toward countries in Western and Central Europe. More than 80% of Russian gas goes to Europe through Ukraine.

Ukraine’s key gas transportation facilities were built in 1970-1980s. Internal and external diagnosis of gas mainlines in 1996-2005 showed that their real technical condition is satisfying in general.

Ukraine’s gas transportation system, the continent’s second largest, after Russia by technological capacity, ensures the reliable supply of domestic and imported natural gas to domestic consumers, as well as export deliveries of Russian gas to European countries. Russia contributes 85% to the gross volume transported.

The high reliability of gas supplies is supported by an advanced system of powerful underground gas storages, which are located in the eastern and western parts of the country. Underground storage capacities are much greater than local demand, and the storages have been long used to keep gas for other countries.

The GTS of Ukraine’s 13 gas underground storages have an active capacity exceeding 32 bn cu. m, 80% of which is located close to Ukraine’s western border.

Ukraine continues to maintain and develop its transit potential, taking into account the energy strategies of the European Community and the Russian Federation. This is based on foreseeable development of the transportation network in Europe.

Russia’s interest in implementing projects which would boost the transit capacity of Ukraine is mostly seen as coming from growing demand for natural gas by new members of the European Union and Central Europe (Slovakia, Hungary, the Czech Republic, as well as border areas of Romania and Poland), and not from countries in Western Europe.

The Caspian region is the largest and the most attractive gas source for the Russian Federation, Ukraine, and countries of Europe. Export capacities in Turkmenistan and Uzbekistan are very limited due to the only transportation issues toward Europe – through territory of Russia, which is not interested in competitors on the European market. The export potential of Iran is now being used at a low rate.

Under these conditions, Ukraine has the opportunity to implement its long-term diversification policy, considering the aggregate interests of natural gas exporters from Middle Asia (Turkmenistan, Kazakhstan, and Uzbekistan) and Iran, as well as importers in Europe.

There are several alternatives for natural gas supplies from Middle Asia and Iran to Ukraine – according to explored gas deposits and opportunities to transport gas to Ukraine. The five most attractive projects out of all options proposed are as follows:

Project 1 Turkmenistan – Caspian Sea – Azerbaijan – Georgia – Black Sea – Ukraine.

Project 2 Turkmenistan – Iran – Turkey – Black Sea – Ukraine.

Project 3 Turkmenistan – Iran – Azerbaijan – Georgia – Black Sea – Ukraine.

Project 4 Iran – Armenia – Georgia – Black Sea – Ukraine.

Project 5 Iran – Turkey – Black Sea – Ukraine.

Projects involving gas delivery from Turkmenistan and Iran may be accomplished as soon as 2012-2014.

The top priority direction for Ukraine’s GTS development is the loading of the Torzhok-Dolina and Ivatsevichi-Dolina gas mainlines. Today the mainlines bringing gas from Belarus are only loaded at 20%. Charging in these directions is limited by the lack of available capacities at the Bogorodchany-Uzhgorod section in winter.

The expansion of the Bogorodchany-Uzhgorod section will increase carrying capacity of Ukraine’s GTS toward Uzhgorod and allow higher charges on the Torzhok-Dolina and Ivatsevichi-Dolina gas mainlines.

The project for constructing and further servicing the Bogorodchany-Uzhgorod gas mainline ensures that extra volumes of natural gas transit through the Bogorodchany-Uzhgorod mainline can rise from 5 bn cu. m in 2005 up to 19 bn cu. m in 2010.

For reliable performance of the Bogorodchany-Uzhgorod gas mainline, the gross volume of Ukraine’s underground storage would need to increase in peak load periods by 7 bn cu. m up to 40 bn cu. m.

Given the current geopolitical conditions, Ukraine has the opportunity to base its long-term policy on saving and developing its transport potential by taking into account the interests of all parties concerned: natural gas exporters – Russia, Middle Asia (Turkmenistan, Kazakhstan, and Uzbekistan), and Iran, as well as gas importers in Europe.

The state will maintain cooperation with the Russian Federation on constructing the Bogorodchany-Uzhgorod gas mainline and the Alexandrov Guy-Novopskov mainline sections. Besides, EU states such as Germany and France will become Ukraine’s partners in preventing the re-orientation of natural gas flow from the Caspian region by supplying gas to these particular countries.

Ukraine will keep expanding the volumes of natural gas stored for foreign consumers in local underground storage. To increase the economic efficiency of underground storages, the country may choose to consider the alternative of transforming part of its storage facilities into commercial enterprises, which would then provide services for natural gas storage upon a commercial basis.

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