Ukraine Ready To Upgrade Pipeline Network

September 2011, Vol. 238 No. 9

Ukraine has launched the first stage of a long-planned project to upgrade its pipelines which carry Russian gas to Europe. As the cash-strapped national oil and gas behemoth, Naftohaz Ukrainy, has no money for an upgrade costing billions of dollars, Ukraine will rely on assistance from the end consumer, the European Union, while the supplier, Russia, remains an onlooker – at least for the time being.

In order to qualify for European assistance, Ukraine will have to meet the EU condition to start restructuring Naftohaz. If this occurs, it will be difficult for Moscow to take control over Naftohaz’s pipelines.

A ceremony was held in July to launch the first stage of a project to upgrade the Ukrainian section of the Urengoy-Pomary-Uzhgorod pipeline. Work on the pipeline, which carries gas from western Siberia to the EU, should be completed within three years. The Ukraine government estimates the first stage cost at $539 million of which $231 million is to be contributed by Naftohaz and the rest is expected from the European Bank for Reconstruction and Development (EBRD) and the European Investment
Bank (EIB).

Ukraine officials estimate the total cost to upgrade its pipelines at $6.5 billion and should take at least seven years to implement.