Energy Security Challenges in Ukraine:

A snapshot

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Energy security in Ukraine

Who is responsible for energy security in Ukraine?

What challenges to energy security are in legislation?

What challenges to energy security are in management?

What challenges to energy security are resource-based?

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The purpose of this report

To point out the need to develop an effective energy development strategy

To provide an in-depth analysis of the contemporary state of the energy sector in Ukraine

To determine the main symptoms and problems in the energy sector in order to find a way to cure them

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Who “controls” the energy sector?

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Central executive

bodies

Business

International partners

Consumers

Central executive bodies

More than 15 government agencies are involved informing energy policy.

On 7 July 2010, an Interagency Energy Development Commission was set up.

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The Commission’s purpose is to: •optimize the energy balance structure•establish a positive investment climate •research alternative energy sources

International partners

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Russia Ukraine depends on Russian resources

The EUUkraine is involved in many EU energy

initiatives

The USThe US works on its own strategic

priorities in Ukraine

Legislative gaps lead to:

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Lack of structural reform in the sector

Absence of a system of control over strategic state decisions

Corruption in the energy sector

Lack of control over natural monopolies and independent regulation of their activities

Ineffective rates for residential and industrial users

Strategy

Ukraine’s Energy Strategy to 2030 is an unused basis for forming energy policy:

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Adopting the Energy Strategy in 2006 failed to guarantee its enactment.The Strategy fails to rank its priorities.SInce its adoption, not a single effort has been made to improve it …

Two options for strategic energy planning

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Update the current Strategy1

Offer a new Strategy 2

Problems managing energy

Planning and decision-making system centered in Moscow

Closed, opaque actions of those in power

Lack of a proper tracking system for energy

Undiversified energy supply systems

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Energy resources

Ukraine covers less than 50% of its own energy needs.

Extraction

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Oil: 10–12%

Natural gas: 20–25%

Coal: 90-92%.

Gas, oil & coal: Common problems, missed opportunities

Outdated extraction infastructure

Resource depletion

Inconsistent State policy

Not the conditions for strategic investors

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Atomic energy

Ukraine’s total AES capacity is 7th in the world and 4th in Europe.

Ukraine continues to build new energy blocks

Ukraine is planning its own manufacture of domestic nuclear fuel for AESs

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Ukraine’s electricity—not competitive

Unified transmission system includes: – 8 regional power grids – 1 million km of power lines – 24 oblenergos (oblast power companies) and companies in

Sevastopol, Kyiv and Crimea

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No program to modernize the power grid Debts of over US $16bn on the wholesale electricity market

Renewable energy: Alternative sources

Alternative energy supplies only 1-2% of domestic demandUkraine’s priorities include bioenergy, windpower, mini-hydrolectric power, solar power, geothermal energy, and alternative gases

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Renewable energy: Alternative sources

Windpower potential is 330 million MWt.

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Powerful hydroelectric resources are available in Ukraine’s small rivers, which could provide electricity to hard-to-reach rural areas but need government backing.

Renewable energy: Alternative sources

Ukraine has huge deposits of “revolutionary” shale gas but extraction costs are high and serious investment is needed.

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Biomass is used to produce biogas, biodiesel and bioethanol.

Ukraine grows canola (rapeseed) for export to Europe.

Energy transit

Exit throughput of GTS is 142bn cu m/year. Potential throughput is 175bn cu m.If GTS is modernized, theoretical throughput across Ukraine could be increased to over 230bn cu m/year.Poor technical state of GTS threatens Ukraine’s geostrategic position as the key transit link in the East-West pipeline system.

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Nabucco pipeline

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Whitestream pipeline

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Transiting oil

Until 2000, 65mn t/year of oil passed through Ukraine’s pipeline network, 50mn t of it in transit for export.

By 2009, of only 38.5mn t/year, 29.1 was transiting for export.

In 2002, construction of the 674-km Odesa-Brody pipeline as part of the Eurasian Oil Transport Corridor (EAOTC) was completed.

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Ukrainian-style energy efficiency

Ukraine’s GDP energy consumption is 2.6 times the average around the world. Corruption is the main reason.

Energy efficiency is covered by more than 200 pieces of legislation: – 10 laws– 15 Presidential Decrees – 120 Cabinet resolutions and other legal acts

Yet there’s no understandable mechanism for encouraging energy efficiency.

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Project

Strategic priorities for increasing Ukraine’s energy security to 2030

Goal: To establish the strategic priorities for increasing Ukraine’s energy security.Funding: UK Strategic Programme Fund, “Low Carbon, High Growth” programme

23Foreign & Commonwealth Office

Products and events

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Products

Database

National documents

and international commitments

Analytical Report

“Energy Security Challenges in

Ukraine: A snapshot”

Analytical Brief

“Best international practice in

energy security”

Green Paper

“Problems in Ukraine’s

energy security to 2030”

White Paper

“Strategic priorities for increasing

Ukraine’s energy security to 2030”

Events

Expert Roundtable

To discuss key problems in the energy

sector

28 May 2010

Seminar

To discuss analytical report

22 July 2010

Study Tour

Tour to London and Brussels to learn about best

practice

Roundtable

To discuss Green Paper

Roundtable

To discuss White Paper