Europe and Ukraine to Improve Natural Gas Infrastructure

By Lisa Bryant
Paris
23 March 2009

Europe and Ukraine agreed in Brussels to work together to encourage investment in Kiev's aging gas infrastructure, with Ukraine also endorsing more transparent tariffs for a system that is vital for Europe's energy needs.

Ukrainian PM Tymoshenko and President Yushchenko with EU Commissioner Benita Ferrero-Waldner and EC President Jose Barroso (l to r) at signing ceremony for modernizing Ukraine's gas transit system, 23 Mar 2009

The international conference on Ukraine's gas pipeline took place two months after a gas pricing dispute between Moscow and Kiev that cut shipments to a number of European countries in the dead of winter. Europe gets about one-fifth of its natural gas supplies from Russia and that gas is piped through Ukraine.

Ukrainian Prime Minister Yulia Tymoshenko told conference participants that new investment in the country's gas infrastructure will greatly increase deliveries.

Ukraine presented a plan for modernizing its gas pipeline that it says will cost about $7.5 billion. It also said it would provide fair and transparent tariffs for transshipping gas.

European officials have welcomed the plan as a way to help shore up EU energy security - and Ukraine's economy. External Relations Commissioner Benita Ferrero-Waldner said the 27-member European Union does not want a repeat of past problems.

"We cannot allow our citizens to face fuel shortages in the depth of winter again. Nor can Ukraine's economy develop without a more sustainable approach," said Ferrero-Waldner.

But Russia's energy minister Sergei Schmatko warned against what he described as a "unilateral" approach that does not pay enough attention to Moscow's crucial role as a gas supplier.

Europe has increasingly put a premium on finding reliable sources of energy elsewhere. It is eyeing a gas pipeline project called Nabucco aimed to transport Central Asian gas to Europe in a way that bypasses Russia.