Volodymyr Makukha, Deputy Minister of Fuel and Energy, Ukraine

Dear colleagues, dear forum participants!
First of all I would like to thank you for the invitation to participate in the forum.
Today, almost all states of the world face new challenges concerning the necessity to ensure stably increasing economies’ demands and populations’ demands in energy and food. Such situation determines the need to ensure diversification of energy supplies, to ensure secure energy transit and increasing extraction and production volumes. Obviously, we cannot cope with the mentioned tasks without wide international cooperation based on long-term common interest and on long-term common regional priorities.

In my speech, I will not attempt to estimate the Common European energy policy. Here on the panel, we have many professionals who can do that much better than I do. I would like to talk about Ukraine’s role in ensuring energy security of the Black-sea-Caspian region and European continent. I would also like to discuss the steps that should be made to strengthen Ukraine’s role in this process.

Maximum possible integration of Ukraine’s energy system into European energy system is the key task for today. The main principles of the integration process are set in a number of bilateral and multilateral international agreements such as Action Plan Ukraine-EU, Memorandum of Understanding between Ukraine and the EU on cooperation in energy field and others.

Currently, Ukraine and the EU try are conducting negotiations on new basic agreement aimed at development of stable relations between Ukraine and the EU that will be based on common interests and values and will contribute to implementation of fundamental reforms in Ukraine. Considerable part of this agreement is devoted to the energy-related issues, energy security, in particular. The draft agreement stipulates for continuation and enhancement of the existent cooperation via establishing effective mechanisms of cooperation in crisis situations in energy field; participation in development and modernization of energy infrastructure; development of competitive, transparent and non-discriminating energy carriers market.

Since 2005 Ukraine and the EU are implementing the High Level Energy Dialogue. Regular consultations between Ukraine and the EU provide for effective realization of concrete projects, moreover, they also allow for definition and implementation of common strategic interests.

One of Ukraine’s priorities in developing international energy cooperation is gaining membership in Agreement on Energy Community. Using this opportunity, we would like to stress once again the priority of this goal. At the same time, we understand that in order to meet the criteria of this membership a lot of complex work should be completed. First of all, Ukraine’s energy legislative and normative bases should be brought into correspondence with European legislation.

One more priority of developing international energy cooperation field is synchronous connection of Ukraine’s United Energy System with the European UCTE networks. Ukraine’s geographic location and its high-capacity electricity transmission network of interstate interfaces should become a basis for simultaneous work of the united energy system of Ukraine with the EU-states energy systems. Such synchronization will contribute to increasing energy security of both, Ukraine and united Europe; as well as will provide for commercial advantages.

Of course, strengthening Ukraine’s role in ensuring energy security on European continent requires involvement of other formats of bilateral and multilateral cooperation in energy area, especially in the field of hydrocarbons production and transit. Ukraine is an active participant of the Black Sea Economic Cooperation Organization. Due to Ukraine’s active position, Organization for Democracy and Economic Development GUAM was created; also being aimed at providing solutions to security and economic troubles of the Black-Sea-Caspian region.

As you know, as a result of the Energy Summit that took place in Kyiv on May 22-23, 2008, a common Statement of Presidents was signed, establishing the Caspian-Black-sea-Baltic Energy transit space. It is created as an open community of interested countries from these regions. The Energy transit space is aimed at common activities developing and supporting necessary conditions for ensuring reliable, transparent and secure energy supplies and energy transit from Caspian region and other regions; ensuring mutually beneficial balance of interests of producer, transit and consumer countries in accordance with the Energy Charter and other international documents.

Within the framework of these regional initiatives, Ukraine using its own transit potential strives to ensure increased gas and oil deliveries from Caspian region to Europe. We are specifically suggesting the use of new, more optimal routes for transporting energy carriers.

Thus, construction of the new gas pipeline Aleksanrov Gaj-Novopskov-Uzhhorod is important in terms of transporting gas from Kazahstan and increasing deliveries from other Central Asian states. Putting into operation the first part of this gas pipeline (Borodchany-Uzhhorod) will enable us in the shortest possible time (for less than 2 years) to increase gas supplies to Europe by 19 bcm per year (with minimal investments – $800-900 mln.). From the economic point of view, there is no alternative to this project. The project implementation process is being hampered by non-economic reasons.
Generally, I would like to underline that implementation of projects aimed at increasing transit capacity of the existing and constructing new gas and oil pipelines over the territory of Ukraine requires less financial resources than development of new transit routes by-passing Ukraine. That will eventually determine the energy price for ultimate consumers.

Of course, maintenance of the gas transportation system of Ukraine and its further development requires essential financial resources. In this regard, we pay special attention to the Investment Conference that we are going to conduct together with the European Commission. We hope that this conference will allow us to involve enough financial resources for modernization of Ukraine’s gas transportation system.

Currently Ukraine works on the “Concept of Development, Modernization and re-Equipment of Gas Transportation System of Ukraine”; “Program for Increasing Security and Reliability of Gas Transportation System of the UkrTransGas for 2008-2015”; and the so-called “Master-Plan” for reconstruction of the main gas transportation system of Ukraine.

We have already created organizational committee for preparation and conduct of the aforementioned investment conference. Additional multilateral consultations with leading bank institutions – EBRD, European Investment Bank, and the World Bank are held in order to agree upon approaches to the format and concept of the investment conference. We are sure, that successful conference and successful implementation of reconstruction projects of Ukraine’s gas transportation system will significantly contribute to ensuring European energy security.

Ukraine’s participation in the Energy Charter process since 1998 also adds to strengthening European energy security. Our country, as a party of the Energy Charter Agreement, cooperates with other states-participants of the Energy Charter within the framework of the Trade and Transit Group, Special Group on Strategy issues, Industrial Group, and Investment Group.

We believe that Energy Charter today is a unique international multilateral legally-binding agreement in the energy field, which determines multilaterally-agreed rules of regulation of investments, trade, transit, energy efficiency and clinching of arguments. It is important that the Agreement unites 51 countries and substitutes for a great number of bilateral agreements that should have been reached without it. Ukraine works actively and is ready to continue its activities towards reaching the main goal of the Energy Charter Agreement, that is ensuring transparency and efficiency of energy markets. We hope that implementing ECA principles will lessen the risks for all the energy chain participants – producer, transit and consumer countries, and will contribute to involving foreign investments in energy area.

Joining the Energy Charter Agreement by Russian Federation would also immensely contribute to reaching the Agreement’s goals. RF’s ratification of this document would obviously strengthen the free competition in production and transit areas; would improve access to transit networks, and would lessen transit risks.

In my presentation I have outlined the main directions, where Ukraine’s integration into European energy security system could be very effective. I am convinced that the Forum will serve as a basis for establishments and development of contacts between Ukrainian and foreign energy companies. To sum up, I should stress that today Ukraine is ready to undertake further, technically more complicated and more expensive measures targeted at further integration of Ukrainian energy sector into the European one. Thank you for your attention!

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