New gas law an important step towards Ukrainian integration with EU, Naftogaz says
The law on natural gas that the Ukrainian parliament has passed will bring the country's own standards into line with those of the European Union's Third Energy Package, Ukraine's national oil and gas company, Naftogaz, said.
Naftogaz said in a statement that it "welcomed the adoption of the Law on the Natural Gas Market at today's parliamentary meeting. This is a key document that aligns the Ukrainian natural gas market with the norms defined in the EU's Third Energy Package."
"This law is an important step towards Ukraine's integration with the European Union. It transparently opens our natural gas market to investors, stimulates competition and clearly outlines the functions of the State. Importantly, the law also provides state support to vulnerable customers and establishes quality control measures," said Naftogaz CEO Andriy Kobolev.
"This law creates a properly functioning gas market in Ukraine, based on European best practices, in order to truly protect consumers' rights," said Naftogaz Business Development Director Yuriy Vitrenko.
"The law's provisions allow to both achieve optimal prices for consumers and to stimulate domestic gas production through transparent market methods. Naftogaz employed its major experience buying gas on the European market over the past year in its role developing the document. We have proved in practice that the European model allows gas buyers to obtain the best conditions to benefit consumers," he said.
The law establishes an economically sound approach to the organization of the gas market, Naftogaz said.
Firstly, it separates the functions of operators, distributors and suppliers. "The law introduces mechanisms to prevent anti-competitive practices by gas system operators, distributors and suppliers related to gas storage, distribution systems and LNG development," Naftogaz said.
"The law does not provide for privatization of the gas transportation system operator, which is state-owned," it said.
Secondly, the law clearly delineates the functions of the state and an independent regulator. "The law provides for State regulation of transportation, distribution, storage, installation services, and LNG markets and continuing development of fair competition in the market for natural gas," Naftogaz said.
"Importantly, the law also clearly limits government involvement in the work of the wholesale natural gas market. Thus, wholesaler activity shall not be subject to licensing. Government intervention should be carried out in a non-discriminatory and transparent manner based on common interest such as ensuring the smooth flow of natural gas to consumers and diversification of revenue sources," it said.
"Thirdly, the wholesale and retail natural gas markets will operate a free pricing principle (unless the Cabinet of Ministers of Ukraine exercises its right to implement special responsibilities)."
"The law creates the preconditions for a reformed natural gas market, based on the principles of free and fair competition focused on providing a high level of protection to consumers. These mechanisms should enhance competition due to entry of new market players, which in turn will be a driving force for reducing energy prices," Naftogaz said.
