Last Friday, the Cabinet of Ministers of Ukraine approved the Resolution “On unbundling of operations for transportation and storage (injection, withdrawal) of natural gas”.

“Naftogaz welcomes the formal launch of the process of unbundling the gas transmission function from Naftogaz in line with the Third Energy Package. The approved action plan is a result of a compromise reached after a lasting discussion with government authorities, the Energy Community Secretariat (ECS), representatives of the World Bank and the EBRD. This decision will accelerate Ukraine’s full integration into the pan-European energy system”, says Andriy Kobolyev, CEO of Naftogaz.

According to the approved plan, two new entities will be created, namely, JSC “Main Gas Pipelines of Ukraine” (MGU) and JSC “Underground Gas Storage Facilities of Ukraine” (UGSF). They will take over the respective assets of Ukrtransgaz, the Ukrainian transmission system operator (TSO). Their shares will be 100% owned by the state of Ukraine.

The newly created operating companies will be governed in line with the OECD Guidelines on Corporate Governance of State-Owned Enterprises.

The necessary legal instruments and actions are to be executed during 2016-2017.

The proposed plan suggests that gas transmission assets will be transferred to the new TSO only after the final arbitration award on the claims between Naftogaz and Gazprom currently considered by the Arbitration Institute of the Stockholm Chamber of Commerce.

It is envisaged that Ukrtransgaz will stay under Naftogaz control until the divestment of its non-core assets and resolution of all outstanding matters of dispute related to the company.

The plan also requires that underground gas storage assets are transferred from Ukrtransgaz to the new operator not earlier than an in-depth economic and technical analysis is conducted, aiming to work out the most effective model for their use and management.