Ukraine’s Naftogaz estimates gas pipe network modernization at $3.5 bln

Ukraine’s Soviet-era gas pipeline network needs $3.5 billion for its modernization expected to start this year, a senior executive of the national oil and gas company Naftogaz said on Sunday.

“As we outlined in the master plan, modernization will cost about $3.5 billion, which is much less than the cost of all alternative routes that are offered today in the world,” Naftogaz Deputy CEO Vadim Chuprun said in an interview with Ukraine’s TV Channel Five.

Chuprun declined to specify the sources of funds for modernization, saying Ukraine would start modernizing its gas pipeline network on its own this year but pinned hopes on support from the European Union and Russia.

Ukraine’s Fuel and Energy Ministry has said the ex-Soviet republic intends to raise $6.5 billion in investments to modernize the gas pipeline system by 2018.

Ukraine accounts for 80% of Russian gas transit to EU nations. Kiev has long been trying to persuade Moscow to abandon the idea of building the Nord Stream and South Stream gas pipelines, which will significantly reduce gas transit volumes through Ukrainian territory.

Ukraine’s gas network, which includes more than 37,500 kilometers of pipe plus 71 compressed air plants and 13 underground gas storage facilities, pumps 141 billion cubic meters of gas to Europe a year.

Kiev has offered Russia and the EU on many occasions to jointly modernize its gas network saying the effort will be much cheaper than the construction of the South Stream pipeline bypassing Ukraine. Russia has said it keeps it interest in the Ukrainian gas pipe network but will not abandon the construction of new gas pipelines.

Russian gas exports to Europe via a pipeline in Ukraine have been disrupted several times in recent years over pricing rows with Kiev. The most recent dispute in early 2009 left Europe without Russian gas for nearly two weeks.

The Nord Stream project intended to deliver Russian gas under the Baltic Sea to Europe, bypassing Ukraine and Belarus as transit states, envisages the construction of two parallel pipelines, each with a capacity of 27.5 billion cubic meters a year.

The 1,224-km pipeline is designed to stretch from Russia’s Vyborg near the Finnish border to Greifswald on the German coast. The pipeline’s first leg is expected to be launched in the fourth quarter of 2011.

The $21.5 billion South Stream pipeline, which will transport up to 63 billion cubic meters of gas to Europe, is expected to be launched in 2015 to diversify Russia’s gas supply routes. The underwater portion of the pipeline will go through Turkey’s territorial waters.


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