Poland to help reduce Ukraine’s energy dependence on Russia

Ukraine and Poland will build a natural gas pipeline that will enable Ukraine to boost gas imports from Poland by up to 10 bcm annually, Prime Minister Arseniy Yatsenyuk told journalists at a joint press conference with Polish PM Ewa Kopacz on Jan. 19. The project's feasibility study will be finished in 1H15, he said. The Ukrainian portion (which might cost about USD 245 mln, according to Interfax) is likely to be financed by loans from the EBRD and EIB, according to Yatsenyuk. Poland was the third-biggest gas supplier to Ukraine in 2014, it supplied only 0.9 bcm, or 5% Ukraine total gas imports.


In his other statement, Yatsenyuk reported that Ukraine will consider reconstructing its power plants to enable them to burn bituminous coal that can be supplied from Poland. For this purpose, Ukraine might use a EUR 100 mln loan that would be provided by Poland, Yatsenyuk said. Among 14 Ukrainian thermal power plants, seven are designed to burn bituminous coal (which is mined beyond the Russian-occupied territory of Ukraine, as well as in Poland), and seven can only burn anthracite and lean coal, which domestially is mined only in the occupied territory of Donbas. Ukraine had to import both anthracite and lean coal from Russia and South Africa in 2H14.



Alexander Paraschiy: If the gas pipeline project is completed, Ukraine indeed will be able to significantly decrease its dependence on Russian gas. Ukraine's total gas import needs are about 22 bcm annually, and Europe, thus far, cannot provide more than 12 bcm to Ukraine, meaning that at least 10 bcm of import needs can be only satisfied by supplies from Russia. We do not expect Ukraine will stop buying gas from Russia even if the joint project with Poland succeeds, but such a deal will significantly increase Ukraine's bargaining power with Gazprom.



The plan to switch Ukrainian power plants from anthracite to bituminous coal is wise, given the occupation of its anthracite deposits and unstable anthracite supplies from Russia. At the same time, we question just how much time and money such a shift would require.



As we understand it, the government might help finance the shift to bituminous coal by the state-controlled GenCo Centrenergo, which operates two anthracite-fired power plants. However, it’s very unlikely that the possible EUR 100 mln loan mentioned by Yatsenyuk would be enough to modernize the company’s 14 anthracite-fueled power units.

Источник: Конкорд Капитал