UOGA Comments on the Power Sector Strategy of Ukraine
On the 7th of July the Committee on Fuel and Power Industries’ of Verkhovna Rada has presented an updated Power Sector Strategy of Ukraine for the period till 2035.
Implementation of the Power Sector Strategy should result in transformation of the fuel and power sectors of the state into the efficient and competitive industries, and also improvement of the country’s independence in the power sector in general. Despite that, experts of the Ukrainian Oil and Gas Association believe that the final document is rather a declaration of intentions since it lacks development scenarios, digital forecasts of developments taking into account these scenarios and certain other issues, which should be included into the draft document.
The strategic aims unambiguously supported by the Association include all activities that should improve the system of state control and consequently the quality of fuel proposal, responsibility for the transparency of tariff policies, diversification of sources and routes of fuel supplies, actions to overcome the power sector dependence from the Russian Federation and much more. All these activities are to the benefit of Ukraine and will directly impact not only the development of oil and gas industries, but also other sectors of economy including the industrial production and public utilities.
At the same time some issues remain unresolved, although UOGA has raised them many times during preliminary discussions of the draft document. For instance, it is a problem of a balance of investment attractiveness of the sector or an issue of expansion and utilisation of the national processing industry in order to reduce the import dependence.
The Association is cautious that establishment of so-called “preferential fiscal regime and tariffs for crude oil suppliers” could lead to distortions of principles of the free competition. Also, there might be too many unconsidered conditions and factors that could affect the fulfilment of tasks regarding satisfaction of at least 50% of the national fuel market demand with eco-fuel produced by Ukrainian entities compliant with the minimum Euro-5 standard. An intention of the government to limit the supply of each type of oil products provided by a single supplier as the maximum of 30% of the total imports also looks artificial, since this condition breaks the principles of the market economy and makes possible the development of corruption schemes.
Standing by the principles of maximum transparency and equal rights of the game for all market participants the Ukrainian Oil and Gas Association has made multiple proposals on the necessity to design the legal basis of oil and gas sector operation. Resolution of the “problem parts” of the Power Sector Strategy of Ukraine would depend on the detailed and weighted preparation of road-maps for every sector of economy.