EC, banks meet with Ukraine to plan pipeline upgrades

A conference aimed at setting up a political and financial framework to modernize Ukraine's 40-year-old gas transit network took place Mar. 23 in Brussels.

Doris Leblond
OGJ Correspondent

PARIS, Mar. 26 -- A conference aimed at setting up a political and financial framework to modernize Ukraine's 40-year-old gas transit network took place Mar. 23 in Brussels. The European Commission and three international banks met with members of the Ukraine government and signed the modernization master plan agreement.

The banks represented were World Bank, European Investment Bank, and European Bank for Reconstruction and Development. European Union delegates were joined by representatives from Russia, Canada, and the US.

The participants described the plan as a major step toward ensuring that Ukraine's gas transit system operates "at the highest level of sustainability, efficiency, transparency, and reliability." It earmarked €2.5 billion for improvements and modernization of the existing network to 2015 but did not cover a pipeline extension.

A full business modernization plan will set out the timetable and sequencing of work to ensure reliability and efficiency as well as minimum possible disruption of supplies to and through Ukraine. The EC and the financial institutions will also provide technical assistance to the technical coordination unit to be set up within Ukraine's Naftogaz. As soon as the unit is in place, the lenders will start due diligence work on the projects identified in the master plan.

Russian Energy Minister Sergey Schmatko and an important delegation was present, a fact that did not prevent the Mar. 24 issue of the Moscow Times from reporting: "Russia broke off talks with Ukraine Tuesday after Kiev angered the Kremlin by asking European Union investors to help modernize its gas lines network."

The newspaper said that Russian Prime Minister Vladidmir Putin "threatened to review ties with the EU" and had "a number of questions about the Ukraine gas discussions."

Queried by OGJ about this, a commission spokeswoman showed surprise, pointing to the presence at the conference of Russia's energy minister.

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