Project to strengthen country’s energy security, support sector reforms, improve performance and governance at Naftogaz
The European Bank for Reconstruction and Development (EBRD) Board of Directors has approved a project to extend a loan of up to $300 million to Ukraine’s national gas and oil company Naftogaz for purchases of natural gas on the European market to fill storages for the winter heating period.
The loan will strengthen Ukraine’s energy security by supporting diversification of natural gas suppliers and delivery routes. It is closely linked to a previous Naftogaz pipeline project to upgrade and repair a key section of Ukraine’s gas transmission system, the western part of the Urengoy-Pomary-Uzhgorod pipeline, which was signed between the EBRD and Ukraine in 2014.
Both projects are designed to stimulate reforms in the Ukrainian gas market that will help move the sector towards best practice in market-based principles and liberalisation. They will strengthen corporate governance at Naftogaz and introduce greater transparency and efficiency in its purchases of natural gas. Proceeds from the loan will be used in strict compliance with the EBRD’s Procurement Policies and Rules, best European practice and the European Federation of Energy Traders documentation.
The “National Joint Stock Company Naftogaz of Ukraine” is a state-owned Ukrainian holding company consisting of a vertically integrated group of businesses active in oil and gas production, transportation, storage and refining as well as the supply of fuels.
Riccardo Puliti, EBRD Managing Director, Energy and Natural Resources, said: “This project is another important landmark in the reform of Ukraine’s gas sector. Our loan will support key areas such as the establishment of a truly independent regulator, the improvement of tariff methodology as well as the introduction of a gas network code. It will contribute to better governance and financial sustainability of Naftogaz”.
Technical assistance for the implementation of a Corporate Governance Action Plan for Naftogaz is provided by the EBRD-Ukraine Multi-Donor Account established at the Bank in 2014 and funded by Denmark, Finland, France, Germany, Japan, Netherlands, Poland, Sweden, Switzerland, the UK and the US.
The EBRD is the largest international financial investor in Ukraine. As of 1 September 2015, the Bank had a total cumulative commitment of €11 billion in 346 projects throughout the country.