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Ukraine and EIB sign €150 mln pipeline deal

Staff writer |
Ukraine and the European Investment Bank (EIB) have signed an agreement to finance the modernization of the Urengoi-Pomary-Uzhgorod (UPU) gas pipeline for €150 million ($187 million).

The agreement was signed by Ukrainian Prime Minister Arseniy Yatsenyuk and EIB President Werner Hoyer (see Multilateral banks to support key Ukraine pipeline development, 14 November 2014).

Yatsenyuk said in a press statement he estimated the project would reduce leakages during transport along the pipeline by 20%. The work will also improve Ukraine’s energy security by securing supplies and make the pipeline more environmentally friendly.

Ukraine’s Cabinet of Ministers issued a resolution in October to borrow up to €150 million from the EIB to upgrade the UPU pipeline. The funds will be transferred to state-run transmission system operator Ukrtransgaz as a subloan at an interest rate of 2% per year.

The EIB approved the funding in the second half of October. In addition, the European Bank for Reconstruction and Development could provide up to $200 million to help reconstruct the pipeline. The bank’s board is set to approve the project on 10 December 2014.

Yatsenyuk said at the signing he hopes Ukrainian producers will win a tender to supply pipes needed to repair a 120-km stretch of the UPU route.

The pipeline upgrade will be carried out over four years. In addition to the new pipes, two gas compressor stations will also be modernized. The UPU pipeline is used by Ukrtransgaz to supply Russian gas to Europe. Ukrtransgaz, which is 100% owned by state-owned Naftogaz Ukrainy, operates a system of trunk pipelines and 12 underground storage facilities in Ukraine.

The capacity of Ukraine’s gas transport system is 288 billion cubic metres at the entrance and 178.5 bcm at the exit of which 142.5 bcm goes to European countries and 3.5 bcm to Moldova.

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