EBRD supports private sector investment in Ukraine’s gas sector

By Anton Usov

The EBRD is supporting greater private sector investment in Ukraine’s gas sector with a $40 million loan to Kubgas, a local exploration and production company. The loan will finance the development of the company’s gas and condensate fields in the Lugansk region, eastern Ukraine.

Kubgas, majority owned by Kulczyk Oil Ventures Inc of Canada, is planning to use the proceeds of the loan to implement an extensive drilling program, to put in place equipment efficiency upgrades and to acquire new specialised equipment.

The new investments are also expected to help Kubgas achieve energy consumption savings of up to 10 per cent or around 150,000 kWh per year. The loan will be available in two tranches of $23 million and $17 million, respectively.

By financing this project the Bank is continuing to promote private investment in the Ukrainian gas sector which is otherwise dominated by state-owned entities that were responsible for the vast majority of the total domestic gas production in 2010.

Kubgas is among very few examples of private sector players operating successfully in Ukraine. The EBRD is convinced that the success of the project can send an important signal about the benefits of private sector involvement and foreign investment in an industry which is still largely undeveloped in Ukraine.

The European Bank for Reconstruction and Development is the largest financial investor in Ukraine. As of 30 April 2010, the Bank had committed over €6.2 billion ($9.2 billion) through 271 projects.