Моніторинговий звіт про просування України у виконанні Угоди про Асоціацію з Європейським Союзом у сферах енергетики та довкілля за січень 2017 року

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  Моніторинговий звіт про просування України у виконанні Угоди про Асоціацію з Європейським Союзом у сферах енергетики та довкілля за січень 2017 року
  • 1. This publication was prepared with the support of the European Union. The contents of this publication are the sole responsibility of NGO “DIXI GROUP”, as well as Civil Network “OPORA”, All-Ukrainian NGO “Energy Association of Ukraine”, Resource & Analysis Center “Society and Environment”, Association “European-Ukrainian Energy Agency”, and can under no circumstances be regarded as reflecting the position of the European Union. The project “Enhancing impact of civil society in monitoring and policy dialogue on energy and related sectors’ reforms in line with the Association Agreement implementation” aims at strengthening the role of civil society in advocating reforms in the energy and related sectors. The key objectives of the project are:  monitoring of the implementation of the energy provisions of the Association Agreement, including relevant environmental and trade-related commitments;  strengthening the civic experts’ and local actors’ capacity to track actual implementation of the reforms;  facilitation of public dialog to lead in proper implementation of the European energy and environmental reforms;  informing stakeholders and the Ukrainian society about the meaning and potential benefits of European reforms in energy and related sectors in order to empower them to keep the government accountable for pursuing these reforms.
  • 2. Executive Summary In December, the Managing Committee for coordination of work on preparation of the updated Energy Strategy of Ukraine until 2035 chaired by the Vice Prime Minister Volodymyr Kistion recommended to take the draft document as a basis for further expert and public discussion and follow-up revision, and the MECI published the text on its website. In the natural gas sector, in the context of the governmental plans to increase gas extraction in Ukraine, the Parliament has not supported reduction of the rent for gas extraction. On the other hand, the Parliament has approved a new scheme of funds distribution between general and local budgets. At the same time, the Ukrainian side, together with foreign colleagues, is attempting to address the problem of increasing use of the pipelines bypassing Ukraine by Russia. In the electricity sector, drafting the legislative framework, which is essential for the sector, has been deferred to the next year. The Parliament failed to consider the draft Law “On the Electricity Market of Ukraine” in the second reading. The Government also faces the problem of accumulating arrears owed to miners. What concerns energy efficiency, here, along with the optimistic signals resulting from the development and registration of respective legislation with the Verkhovna Rada, there are still backlogs in systemic crediting of energy efficiency, and lack of certainty as regards monetisation of subsidies etc. In the field of environment, progress is stalled as a result of delays with vetoed draft laws on environment impact assessment and strategic environmental assessment. There’s a risk that those legislative drafts will be delayed, which is going to prolong the period during which those respective issues will remain unsettled, and Ukraine, therefore, will be unable to fulfil its commitments in the sector. The situation in the sector of oil and oil products can also be characterised by lack of law-making efforts and legislative regulation. Therefore, the objectives for 2016, which could have enabled the progress in the sector, remain unfulfilled, which automatically adds to the objectives to be met during the next year. Progress in the area of business climate this month was mainly in the realm of establishing a dialogue and creating co-operation platforms as well as encouraging informational transparency of the public authorities operating in the energy sector. It is insufficient but necessary for the further development of a proper working dialogue and mutual understanding with business environment. Abbreviations: AA — Association Agreement CMU — Cabinet of Ministers of Ukraine Commission — European Commission DHP — district heating provider FES — fuel and energy sector GDS — gas distribution system GTS — gas transportation system INSC — Instruments for Nuclear Safety Co-operation МЕCI — Ministry of Energy and Coal Industry of Ukraine NAK — Naftogaz of Ukraine National Joint Stock Company NEPURC — National Energy and Public Utilities Regulatory Commission SAEZM — State Agency of Ukraine for Exclusion Zone Management SNF — spent nuclear fuel SNRIU — State Nuclear Regulatory Inspectorate of Ukraine SFSU — State Fiscal Service of Ukraine SSTC NRS — State Scientific and Technical Centre for Nuclear and Radiation Safety OPP — Odessa Port Plant Parliament — the Verkhovna Rada of Ukraine RW — radioactive waste TPP — thermal power plant UES — Unified Energy System of Ukraine
  • 3. Gas In December, no considerable changes took place in the reform of legal framework of the gas market. In the context of the budget decentralisation processes, a new system of distribution of revenues from the natural gas rent between general and local budgets was introduced. At the same time, the rates of the natural gas rent has not changed. Along with it, a draft Law on specific aspects of leasing out State- owned gas distribution systems (GDSs) as approved by the Government has been registered with the Parliament. A Working Group for the acceleration of Naftogaz restructuring headed by the Vice Prime Minister approved amendments to the Naftogaz restructuring action plan, which provide for updating the deadlines and objectives of that plan. Amendments to the Company’s Articles of Association have also been approved. In mid-December, the Parliament adopted a new version of Naftogaz’s Articles of Association (Resolution No. 1044) by approving amendments aimed at conflict-free functioning of Ukrtransgaz PJSC during the transitional period (until a new GTS operator commences its operation). The Presidents of Ukraine and Poland have made a stand against the Commission’s decision giving Gazprom increased access to the OPAL pipeline, which opens an opportunity for Russia to increase gas supplies via pipelines bypassing Ukraine. According to their joint statement that decision is unacceptable not only from the viewpoint of disruption in supply through Ukraine and Poland but also from the viewpoint of energy security of the EU Member States, and therefore, it should be reconsidered. Meanwhile, in 2016, gas transit to Europe via Ukrainian gas transportation system has considerably increased (by 23%) and reached 82.2 billion cubic metres. Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (AA: Articles 338, 341, Annex XXVII) pursuant to Article 278 of the AA The Parliament has approved amendments to the Budget Code (No. 30381 ) insofar as the concern allocation of the part of revenues from the rent for oil, natural gas and gas liquid extraction in the following proportions: 2% — to village, township and town/city budgets, 1.5% — to oblast budgets, and 1.5% — to the budgets of respective raions (before those amendments were approved, the whole amount had gone to the State Budget of Ukraine). Financial opportunities to be given to local budgets since 2018, will not only contribute to improvement of environmental and economic situation but will increase the locals’ interest in the development of the gas extraction industry. Amendments to the Tax Code2 insofar they concern reduction of rent rates for have also been approved. However, unlike the oil rent which has finally been reduced from 41 to 21% (depending on the depth), the proposals on reduction in the rates of rent for the extraction of gas condensate and gas from new boreholes (launched after 1 January 2017) as approved in the first reading, were rejected in the second reading. Some draft Laws on reduction in rates of gas rent (No. 54593 , No. 5459-14 ) are pending consideration in the Parliamentary committees. The draft Law No. 52895 on bringing 13 other legislative acts in line with the Law of Ukraine "On the Natural Gas Market” registered back in October, again, has not been considered in December. Meanwhile, with the view of implementation of the Law “On the Natural Gas Market” insofar as it concerns paid use of State-owned gas distribution systems the draft Law No. 55586 has been registered with the 1 2 3 4 5 6
  • 4. Gas Parliament. If adopted, that draft Law will bind oblast gas companies to conclude new lease agreements and pay leasing fees for the use of State-owned GDSs to the budget. An alternate draft Law No. 5558-17 on specific aspects of leasing GDSs and elements thereof has also been submitted. The fundamental difference of that document from the one submitted by the Government is that the lessor thereunder is not the State Property Fund but “a State-owned undertaking designated by the Government”. That undertaking is likely to be Naftogaz as a minority shareholder in GDS operators. A bit earlier, a draft petition to the Government suggesting immediate action with the view of introduction of paid use State-owned property as part of the GDS was submitted to the Parliament8 . The MPs who prepared that document, in particular, pointed out that delays would result in budgetary losses such as lost revenues (UAH 930 million as from the day the Law of Ukraine “On the Natural Gas Market” entered into force till December 2016). On December 14, by its Resolution No 10449 , the Government approved amendments to Naftogaz’s Articles of Association as recommended by the governmental working group, and amendments to the regulations on the company’s Supervisory Board and the Board of Directors. The same resolution approved the versions of the above-mentioned documents, which regulated the company’s operations, to come into effect as from 1 April 2017. All those amendments aim at improvement of Naftogaz’s corporate management, creation of proper conditions for the performance of its functions by the GTS operator, Ukrtransgaz, and prevention of conflicts between Naftogaz and Ukrtransgaz, which used to take place earlier, during the reform process. Along with that, the Government has expanded the scope of regulated gas prices for heat generating companies to cover the provision of heating services and hot water supply to the State-financed institutions. Respective amendments to that effect were included in the Regulation on imposing special obligations on the natural gas market players (Resolution No. 93710 ), which will be in effect until 21 March 2017. Meanwhile, Ukraine has considerably liberalised natural gas exports: in accordance with the Government Resolution No. 100911 , in 2017, gas export will not be subject to licensing and no quotas will be set in that regard. The Government has also cancelled a number of resolutions in order to bring the legal framework in line with the Law of Ukraine “On the Natural Gas Market”12 ; that decision was the result of the fact that the issue of compensation of difference in tariffs for households, State-financed institutions and other gas consumers was no longer relevant. On its meeting on December 28, the Government adopted the Concept of the development of the gas extraction industry until 202013 . The key objective is to increase domestic gas extraction up to 27 billion cubic metres by 2020, but the failure to approve reduced rent for new boreholes makes achievement of those objective rather unrealistic. The Government officials, MPs, experts and representatives of mining companies etc. took part in the development of that document. During December, the NEPURC published two new draft Resolutions concerning the natural gas market: 1) on approval of licensing conditions for economic activities14 and 2) on amending certain resolutions of the NEPURC to introduce the use of energy units15 (so far, only for settlement purposes). The former draft 7 8 9 10 11 12 13 14 15
  • 5. Gas document regulates licensing conditions for transportation, distribution and storage (injection, withdrawal), LNG facility services and natural gas supply. The latter approves supplementing a number of the NEPURC’s regulatory acts (including, payment documents) with the provisions on the procedure of conversion of the natural gas volumes into the volumes of the energy supplied/consumed. According to a new price list of Naftogaz16 , as from 1 January 2017, the gas price, compared with the price in December, has been reduced by 2.4% — down to UAH 8,374.8 for 1,000 cubic metres. Exception is industrial and other categories of customers who are not covered by the provision on imposition of special obligations and are not in debt to Naftogaz and purchase 50,000 cubic metres or more on a pre-paid basis17 — they are offered a price of UAH 7,551.6 for 1,000 cubic metres (reduction by 2.9%). Regulation (EU) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 (AA: Articles 338, 341, Annex XXVII) pursuant to Article 278 of the AA, trade-related issues (Articles 269–274 of the AA): The Presidents of Ukraine and Poland agreed on the acceleration of construction of the gas interconnector18 between the countries, with the total length of 99.3 km, with the feasibility study for the project already carried out by the GTS operators. On December 8, representatives of the national operators — Ukrtransgas PJSC and GAZ-SYSTEM S.A. — signed the Agreement on the rules of interaction between the GTSs through the future interconnector between Ukraine and Poland19 . The agreement provides for co-operation between the GTS operators of both countries in performing design and construction works. The NEPURC has published its decision on the full implementation of the Commission Regulation (EU) No. 312/2014 in domestic legislation20 . To ensure that implementation, the regulator drew up and adopted the protocol resolution providing that amending the GTS Code will have been considered before 1 April 2017, which will make it possible to introduce the daily balancing mechanism in the gas market subject to availability of the respective IT-platform for the GTS operator; the Committee of the Verkhovna Rada of Ukraine on Fuel and Energy Complex will be addressed with regard to the initiation of amendments to the Law of Ukraine “On Public Procurement”. Setting up of the IT-platform ensuring daily balancing of gas prices, in particular the issue of respective schedule and cost are also being considered by the working group established on the basis of the MECI21 . Directive 2004/67/EC concerning measures to safeguard security of natural gas supply (Articles 338, 341, Annex XXVII to the AA), functioning of an 'Early Warning Mechanism' (Annex XXVI to the AA), reacting to an emergency situation (Articles 275–276, 309, 314) The total past due debt of the heat supplying companies to Naftogaz as of 27 December 2016 was UAH 22.3 million, of which UAH 6.7 billion had been accumulated during 201622 . Debt of DHPs and CHPPs for the natural gas used for heat generation is about 83% of the total debt, and the debt of CHPPs for the natural gas used for electric power generation is about 9%, the debt of the direct consumers is about 8%. To prevent further accumulation of OPP’s debt for natural gas and maintain its investment attractiveness, the Government agreed to the proposal of the State Property Fund on restructuring the OPP’s debt to 16 17 Payments during the calendar month preceding the month when gas is delivered 18 19 20 21 22 =12&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8&
  • 6. Gas Naftogaz for the next two years (Ordinance No. 1018-р23 ). Repayment of the debt is planned to be commenced from 1 April 2017 in equal instalments, interest free. At the same time, it was announced that the OPP had presented a counter-proposal to temporarily suspend production24 . It was reported that no accord on the gas purchase additional agreement between Naftogaz and Gazprom had been reached during the trilateral negotiation in Brussels facilitated by the Commission25 . Andrii Koboliev, CEO at Naftogaz, said that without such an agreement signed, his company is not planning to resume negotiations on gas purchase with Gazprom until the end of the heating season. Along with that, on 30 December 2016, Naftogaz signed a credit agreement with CitiBank and Deutsche Bank26 , which opened a credit line (EUR) against a guarantee of the World Bank27 for the amount equivalent to 500 million US dollars. The agreement’s duration is four years — 2 years for purchasing gas and 2 years for repaying the credit. Not only Ukrainian and Polish leadership, as it was stated during the joint press-conference on December 2 in Warsaw28 , argues for cancelling the Commission’s October decision on the OPAL pipeline as such that grants Russia wider access to the European gas market and thus undermines the EU energy security principles, but the same statements were made by heads of national companies of both countries. Polish PGNiG challenged that decision29 referring to damage to its interests as well as to violation of the effective EU standards on competition, protection of third parties’ interests and proportionality. PGNiG’s President of the Board Piotr Woźniak stated that on December 4, their German subsidiary company had lodged a claim against the Commission’s decision with the ECJ and requested to suspend its implementation both by the Commission and the German regulator (Bundesnetzagentur). On December 6, Naftogaz of Ukraine PJSC applied to Bundesnetzagentur30 , requesting the latter to apply general procedure of administrative decision-making for the agreement regulating conditions of access, which had been concluded between the above-mentioned regulator and Gazprom and its affiliated companies with the view to amend the decision of 2009 concerning OPAL pipeline. Naftogaz requests being allowed to participate in that administrative procedure for the purpose of presenting its official position and gaining access to the texts of the agreement itself and the Commission’s decision of 28 October 2016, which has not been published until now. According to ENTSOG31 , from 22 to 28 December (after the Commission’s decision on OPAL) Gazprom had increased daily volumes of gas supplies from 57.1 to 80.5 million cubic metres, with almost all surplus volumes pumped through OPAL. According to NAK’s calculations32 , use of the Nord Stream-OPAL route has increased by 41%, and OPAL’s work load from 50% to over 80%. During that period, daily volumes of transit throug
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