GGP: Adversity and reform: Ukrainian gas market prospects
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.
This article was originally published by the The Oxford Institute for Energy Studies March 2017
The Ukrainian gas market, one of Europe’s largest, is in transition away from a set of arrangements based on large-scale Russian imports and post-Soviet economic relationships, to a new set of arrangements underpinned by closer integration with the European market. The transition is taking place against a volatile political and economic background: the large-scale social protests of 2013-14, the removal of president Viktor Yanukovich’s government, the annexation of Crimea by Russia, the establishment of unrecognised separatist “republics” in eastern regions, the military conflict that has claimed nearly 10,000 lives (2014 onwards), and the economic slump that has accompanied it. In reviewing how the gas market has changed during these events, it may be helpful to think of two types of issues. First, issues relating to the Russia-Ukraine gas trade: efforts by Ukraine to minimise its dependence on Russian gas imports, and by Russia to diversify gas transit away from Ukraine, and to other consequences of their failing political and economic relationship, including the arbitration cases between Gazprom of Russia and Naftogaz Ukrainy in the Stockholm Chamber of Commerce. Second, there are issues concerning market development: about the new market arrangements that are emerging, regulation, the changing corporate landscape, and the consequences of price reform being implemented in the midst of a severe economic downturn. One argument made in this essay is that the Russia-Ukraine issues will most likely recede, albeit slowly, into the background, particularly after 2019, and the market development issues will come to the fore. The essay deals first with the Russia-Ukraine issues, and then with the market development issues i.e. changes in demand and supply, and in market structure and regulation.
Simon Pirani
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.