EAU Newsletter “EU-Ukraine energy cooperation”

The modern situation with the Europe’s energy supply is characterized by a constant complication of relations between the European Union and Russia. Correspondingly, transit countries begin to play a more and more important role in securing the reliability of Europeans’ supply with energy carriers. 

After revolutions in Georgia and Ukraine, Russian elites began to assess the European Union as a new geopolitical rival, aiming at creating an area of its influence at the territory of the former Soviet Union. A serious distrust to the Brussels’ politics insinuated into the strategic relations that used to be maintained earlier. The most serious conflict over the last 6-7 year between the European Union and Russia took place in 2006. This conflict was connected with the oil and gas supplies, and the position of a transit state was of a key importance for providing the EU energy security.

Unfortunately, in the general atmosphere of mutual accusations, the essence of disputes between Russia and Belarus, Russia and Ukraine, remained unclear for the European Union. At the same time, Moscow began to abruptly alter its behavior at the common energy market. Russia demanded that interests of countries, which supply energy resources, be taken into account in details in the new EU Energy Charter. This document has never been signed by Russia, which significantly reduced its real practical importance.

In 2007, Brussels and Moscow will face serious battles in the energy field. Russia and EU will have to solve a number of very important problems. First of all, the sides have to agree signing a new agreement, which will enhance, or, at last, indicate the collaboration between Russia and the European Union. Without this document, there will not be any foundation for any further rapprochement of Moscow and Brussels. As the relations between Russia and EU have seriously changed during the last years, Moscow does not want Brussels to regard it as an energy appendix of Europe. Russia has become rather a powerful player, with a number of advantages over the European Union. First, Moscow and Brussels will have to agree signing a new Energy Charter. The previous Charter will not be signed by Russia: it does not correspond to Moscow’s interests. Russia will try to agree a new document, which will reflect the interests of countries, exporting energy resources. One cannot rule out that this Charter will be signed in the
period of the German presidency over the EU. Unfortunately, the Energy Charter is not very attentive to the interests of transiting countries.

Russia will have to persuade the European Union that it remains a reliable gas and oil supplier to Europe. As well as that Moscow has no intent to lose Europe as a consumer of its energy resources. At the same time, after the developments of January 2006, when the Russian-Ukrainian gas conflict happened, and January 2006, when there was the Russian-Belarussian oil conflict, the EU clearly understands the role of the countries, through which energy resources are transited to Europe. Namely Ukraine occupies the main role among these countries, as it enjoys a unique geopolitical position and a powerful energy system.

The Ukraine’s gas-transport system consists of gas-main pipelines, distributing networks, and gas depots. The total length of the Ukrainian gas pipelines makes up 283.2 thousand km, out of them: gas-mains make 37.1 thousand km, including 14 thousand km of pipelines of a big diameter (1020-1420 mm), distributing networks – 246.1 thousand km. The system comprises 72 compressor plants (122 compressor workshops) and 13 underground depots with the Europe’s biggest (after Russia) active gas volume – more than 32 billion cubic meters, or 21.3% of the general European active volume. The underground gas-preserving network includes four complexes: Western-Ukrainian, Kyiv, Donetsk, and Southern-Ukrainian. The carrying capacity of the system at the inlet makes up 290 billion cubic meters a year, and at the outlet - 175 billion cubic meters. In 2004, 120 billion cubic meters of Russian gas were pumped through the Ukrainian gas pipelines to Europe, which makes up nearly 80% of the total volume of the Russian gas, supplied to Europe.

The oil-transport system of Ukraine is a network of trunk oil pipelines, 450 km by the total length. The system’s capacity at the inlet makes up 114 million tons of hydrocarbon raw annually, at the outlet – 70 million tons. The system’s operation is provided by 38 oil-transfer plants and a tank battery, more than 1000 thousand cubic meters by a total volume. During the last years, the volume of oil transporting through Ukrainian oil pipelines made up on average 64-66 million tons a year, out of which 53-55 million tons a year fall on transit. As for the carrying capacity of the first line of Odessa-Brody oil-transport system, it makes 14.3 million tons of oil a year. The system’s capacity is planned to be developed up to 40 million tons a year.

The Ukraine’s consolidated power system is connected by 75 electric mains with seven power grids of the neighbor countries. In 2006, the electrical energy exports to the CIS countries (Belarus, Moldova, Russia) and the Eastern Europe (Poland, Romania, Slovakia, Hungary) made up 10.4 billion kW/h. The technical capacities of electrical energy exchange with them exceed 50 billion kW/h. Burshtynskiy “Island” operates synchronously with the European electric system. If necessary, the volume of electrical energy export to Europe through this island may be significantly increased.

Thus, the assistance to developing the transit opportunities of Ukraine is the issue, on the positive solving of which depends the energy security of the majority of European countries. Among the main perspective projects, which are due to broaden the transit opportunities of Ukraine, and, respectively, to allow EU countries diversifying the sources of receiving energy carriers, we will emphasize the following:
- Building Bohorodchany-Uzhhorod gas pipeline 1429 km by length, which is to be carried out in three stages. After the first line is launched into operation, the volumes of gas supplies to Europe are due to grow up by 5 billion cubic meters a year, after the second line is launched – by 16 billion cubic meters a year, and after the third line – by 19 billion cubic meters a year. Bohordchany-Uzhhorod is planned to be built in the corridor of already existing gas pipeline “Progress”.
- The Euro-Asian oil-transport, which will be used to satisfy the demand for oil and transport services of Ukraine’s neighbor countries of the Central and Eastern Europe. The geographical position of Ukrainian oil pipelines provides oil transporting from the eastern direction to the western and southern borders of Ukraine, and also in the direction from the South to the North. “Druzhba” (the western direction) is loaded by not more than 87%, Prydniprovski systems (the southern direction) – by 66%, “Odessa-Brody” (the southern direction) – by 27% (as of today, the capacities of the Ukrainian oil-transport system are used by less than 40%).
- A further development of “Druzhba” and “Adria” oil pipelines, which, at the first stage, must provide an additional transit of hydrocarbons through the Ukrainian territory at 5 million tons of oil annually. In future, it is planned to gradually increase the transit through Ukraine towards the direction of deep-water Croatian port Omishal, up to 10-15 million tons of oil a year.
- Another perspective direction is also a further development of Ukraine’s own hydrocarbon raw resources in the deep-water shelf of the Black and the Azov Seas. The current total resources of hydrocarbons in the Ukrainian part of the shelf make up nearly 2.3 billion tons of conditional fuel, or nearly 30% of the Ukrainian own hydrocarbon resources. The volume of the necessary investments to develop the shelf is assessed at 15-20 billion US dollars. The government of Ukraine has been taking measures to attract investments within frames of fulfilling the Agreements on Division of Production. The hydrocarbons, extracted in the Ukrainian Black Sea shelf, in case of their supplies to Europe, may principally change the situation and conjuncture of the energy market of the Old World countries.
- Providing a parallel operation of the Ukraine’s power grid and that of Europe. To achieve this goal, it is necessary: to reconstruct and upgrade energy units of thermoelectric power stations, with using modern steam-and-gas aggregates, to build new high-tension transmission lines towards the western direction, including to increase electrical energy export in future; to provide a strategic development of flexing energy capacities to stabilize the frequencies in the power grid; to increase the reliability of nuclear reactors, to reconstruct them and prolong the period of their operation.

Under the current conditions, European investments into the energy potential of Ukraine will secure not only additional energy opportunities for the European Union, but also will create additional guarantees of stability and protectability of European energy interests.