This publication is part of Carnegie’s Reforming Ukraine project and is supported in part by grants from the Center for East European and International Studies (Zentrum für Osteuropa- und internationale Studien, ZOiS) and the Open Society Foundations.
The weaknesses of Ukraine’s energy sector since independence in 1991 shine a spotlight on the foundational link between energy security and national security. Ukraine is one of the least energy-efficient countries in Europe—analysis by the U.S. Energy Information Administration found Ukraine’s economy to be two or three times as energy intensive as many neighboring countries, including Poland, Slovakia, and the Czech Republic. While Ukraine’s energy sector accounts for about 12.6 percent of its GDP, the country’s energy intensity is staggering. This creates a massive headwind that drags down national welfare, crowds out economic growth and job creation, and leaves the country vulnerable to political pressure from energy suppliers. Energy is at the heart of every country’s economic well-being, and thus its social and political health. A well-functioning energy sector, which enables all other economic activity, is essential to economic and national security. Reforming its energy sector is critical, unfinished business in Ukraine’s economic and political agendas.
A key question is whether Ukraine is in a position to complete its unfinished energy reform business—the outlook is troubled, but the task is far from simple. To Ukraine’s credit, almost every aspect of Ukraine’s energy sector—the gas market, the electricity sector, regulatory setup, thermal and nuclear power, and energy efficiency—is in flux and some significant steps forward have been achieved.
Nonetheless, transforming Ukraine’s energy sector from being a drag on its economy and national security into a positive enabling force will require both well-designed plans and sound implementation pathways that can be sustained. Proceeding without due planning and preparation poses risks of creating ill-conceived market structures or regulations and negative unintended consequences. Proceeding after excessive deliberation, however, allows opponents of reform to marshal their political forces and obstruct needed change. The challenge for Ukraine is to navigate between these counterposed hazards.
Natural Gas: The Most Visible Part of the Picture
For more than two decades, natural gas supply and transit—and the related politics—have dominated what is said and written about Ukraine’s energy system, both inside the country and out. For much of this period, Ukraine imported most of its gas from Russia, despite Ukraine’s remaining prospective deposits and its legacy as one of the earliest centers of the global gas industry. In the absence of a transparent and well-regulated gas market, Ukraine’s gas supply and transit relationship with Russia was widely understood to have enriched politicians and oligarchs in both countries. Decisionmaking in Ukraine’s gas industry took the form of a series of tactical course corrections, tailored to short-term political expediency rather than a long-term strategy, and executed according to international practices in the industry.
Natural gas is a critical part of Ukraine’s energy mix, representing 30 percent of primary energy consumption in 2016. Gas plays a particularly prominent role in heat generation—some 55 percent of the gas is consumed by district heating companies and households with private heating systems, while only 3 percent is used for electricity generation. Nonetheless, natural gas attracted more public attention than one would necessarily expect from a fuel that provides less than one-third of total supply.
First in 2006 and again in 2009, disputes with Russia over the terms of gas supply and transit led to cutoffs or reductions in delivery. Moscow asserted that Ukraine had failed to abide by the provisions of gas supply and transit contracts. Ukrainian officials denied these claims and began to intensify efforts to strengthen Kyiv’s position on gas matters with Russia. In 2011, Ukraine joined the Energy Community, the group of east and southeast European countries that have voluntarily agreed to adopt the European Union’s (EU’s) internal energy market legislation. Ukraine also started to negotiate with Poland, Slovakia, and Hungary on enabling so-called reverse flows of gas, which would allow gas to flow from west to east, contrary to the region’s prevailing pattern.
Yet neither of these efforts moved rapidly to fruition. The Energy Community membership required both legislative work to implement the entire acquis communautaire—the body of laws governing network energy systems in the EU—and institutional changes such as the unbundling of different functions in the electric power and gas industries. The reverse flow arrangements initially encountered a series of technical and commercial obstacles, some caused by Russia as it sought to prevent the loss of market share in or leverage over Ukraine.
If these post-2009 efforts represented useful but insufficient steps to change the balance in Ukraine’s relationship with Russia, subsequent events prompted further and more decisive efforts. Late 2013 brought the Euromaidan protests, the downfall of president Viktor Yanukovych, and conflict with Russia. Moscow unilaterally terminated the 2010 Kharkiv Accords, which had provided a discounted gas price in exchange for its lease on the naval base in Sevastopol until 2042. Deliveries of coal from the Donbas region, occupied by Russian-backed militants, were also severely disrupted.
Ukraine faced tough options. Expanding domestic natural gas and coal production was technically possible, but the chronically dysfunctional structure of the industry and administrative red tape proved to be powerful limiting factors. One by one, major international oil and gas companies, which had long pursued legal and regulatory structures conducive to new upstream investment, left Ukraine. Domestic production—mostly by Ukrainian or smaller international companies that lack the technological capacity and investment budgets of large international companies—grew only marginally, reaching 20 billion cubic meters (bcm) or around three-fifths of the country’s needs. Many prospective fields were left undeveloped, despite the widely held view that Ukraine has the potential to be self-sufficient in natural gas. However, Naftogaz subsidiary Ukrgazvydobuvannya produced 15.25 bcm in 2017, the company’s highest volume in twenty-four years, and overall domestic gas production for the year reached 20.8 bcm.
In the wake of Russia’s invasion, Ukraine sought to diversify gas supply sources and substantially reduce gas consumption. Domestic consumption dropped dramatically, from 50.4 bcm in 2013 to 33.3 bcm in 2016. This reduced demand stemmed predominantly from an overall contraction of the economy, as well as the fact that many energy-intensive industrial facilities are located in the two eastern regions now controlled by Russian-backed militants. Reduced demand also reflected rapid price increases for residential consumers and district heating companies as prescribed under Ukraine’s commitments to the International Monetary Fund (IMF), and the removal of subsidies to some categories of consumers. Between 2014 and 2016, household gas prices doubled, and further increases are expected after the end of the 2017–2018 heating season in order to comply with the international requirements.
Traditionally, gas prices for both Ukrainian households and municipal heating utilities have always been heavily regulated and subsidized. The state-owned gas company Naftogaz has historically incurred large losses from reselling imported Russian gas at subsidized prices. In 2014, the average household price was approximately $24 per thousand cubic meters (tcm), while the price charged to industry consumers was around $242 tcm. Prices rose steeply in 2016, after Kyiv’s agreement with the IMF. The gas price for most residential customers rose to roughly $276 per tcm, while district heating tariffs increased by an average of 110 percent. As of January 2018, a monthly utility bill for an 85–square meter apartment in Kyiv is estimated around $90, or about one-third of an average monthly salary.
Several factors have provided some assistance to Ukrainians adjusting to the recent energy price increases. First, in place of artificially low gas prices, the government has instituted a program of more targeted direct payments to defray the costs of gas and gas-fueled heat. This program does not employ direct cash transfers to households that lack the ability to pay, the structure that is often found in analogous programs around the globe. Direct cash payments are generally believed to create a more powerful incentive for citizens to find ways to reduce their demand through self-interested household improvements. Instead, Ukrainian government authorities use the consumer’s official income and utility expenses to decide on the discounted final bill and reimburse the company providing utility services. This safety net program is far too broad, considering IMF estimates that as many as half of all households are receiving assistance. Thus, further work is required to improve the program’s efficiency and effectiveness. Nonetheless, the program has yielded certain important results: in 2012, the IMF calculated that the “quasi-fiscal deficits” associated with subsidization and noncollection in the energy sectors would amount to 10 percent of GDP in 2014, then drop to only 2.3 percent in 2016.1
A second factor helping Ukrainian households deal with higher energy prices has been a new governmental program focused on promoting energy efficiency. In addition, the Ukrainian parliament, or Rada, adopted legislation requiring all households to install heat and hot water meters, which is anticipated to drive further efficiency improvements. A third instrument, a new law that implements an EU directive on the efficiency of buildings, was adopted in July 2017, and a long-awaited Energy Efficiency Fund was set up in September 2017.
The need for energy efficiency improvements across the Ukrainian economy is enormous. In 2016, the Ukrainian government spent roughly seventy times more on subsidies for public utilities than on energy efficiency. Over the next fifteen years, Ukraine is projected to undertake modernization programs for buildings owned by national or local governments that will cost approximately $65 billion, but only a tiny fraction of that amount was budgeted in 2017. This means that, in the absence of new investment funds, the government will continue to spend more on wasted energy than on efficiency improvements.
In 2013, imports still came only from Russia and accounted for more than half of gas consumption. With the opening of reverse flow capacity from Slovakia in September 2014, Ukraine began to gradually diversify supplies. In 2016, it halted gas imports from Russia altogether.2 Domestic gas production now accounts for three-fifths of Ukrainian demand. Relatively large shale gas deposits (924 bcm) are available, but Kyiv aims to primarily expand conventional gas production, from the current level of around 20 bcm to 27.6 bcm by 2020.3
Naftogaz: A Crucial Element of the Unfinished Business
Ukraine’s gas sector has constantly been in the headlines since the country’s independence, which chiefly reflects two considerations: the profound difficulty of Ukraine’s relationship with its eastern neighbor, Russia, and the acute need for Naftogaz itself to be restructured for greater transparency, efficiency, and responsiveness to changing market circumstances. Only one of those realities can be unilaterally directed by Kyiv’s decisions and actions. Reforming Naftogaz is critical if Ukraine is to foster an energy sector that more consistently enables broader economic activity.
As a vertically integrated company, Naftogaz and its subsidiaries build, operate, and maintain transit gas-and-oil pipelines; distribute gas; operate gas storage facilities; explore for and produce oil and gas across Ukraine; and provide numerous ancillary services. The company employs a workforce of nearly 75,000 people. In terms of its structure and functions, Naftogaz still needs reforming to become closer to the global-standard energy titan that it aspires to be.
The question of why Naftogaz should be restructured has both reactive and proactive answers. The reactive reason is that restructuring the company is a requirement under the Energy Community and Ukraine’s Association Agreement with the EU, and a condition built into the country’s programs with international financial institutions including the IMF, the World Bank, and the European Bank for Reconstruction and Development (EBRD).
The proactive reason is that Naftogaz’s primary shareholder—the Ukrainian state—has interests in the company acquiring greater transparency, efficiency, and market responsiveness. Naftogaz is the single-largest contributor to the state budget ($2.6 billion, or 10 percent of the 2016 state budget). But as a vertically integrated company, Naftogaz currently performs a number of functions all along the oil and gas value chains, creating numerous structural conflicts of interest.
Since Ukraine became a member of the Energy Community in 2011, it has been clear that the state would need to restructure Naftogaz. But actual progress has been halting. Momentum has only gathered in the past two years, after earlier failed attempts at restructuring. In 2016, the Ministry of Energy and Coal Mining submitted an unbundling plan to the Energy Community, following an independent audit. Naftogaz put in place a detailed corporate governance action plan with the stated goal of creating greater transparency and increasing the predictability of company decisionmaking. But even these steps forward were accompanied by delays and obstacles. In September 2017, little more than a year after a new independent supervisory board was appointed in April 2016, all of the board’s independent members and even one of the government representatives resigned citing “political meddling in Naftogaz’s work.” A replacement supervisory board was appointed in November 2017.
An additional complication in the effort to restructure Naftogaz has been the company’s epic struggle with Russian gas giant Gazprom. Since 2014, the two state companies have been locked in a bitter legal battle over contractual obligations concerning supply conditions and terms of gas transit. The disputes are currently being considered by the arbitration tribunal in Stockholm4. In May 2017, the tribunal issued a preliminary decision and reportedly rejected Gazprom’s claim that Naftogaz had violated “take or pay” provisions in their sales-purchase agreement. Under these provisions, Naftogaz would have been obligated to pay for excessive volumes of gas each year regardless of actual demand; Gazprom sought penalties amounting to $34.5 billion for gas supplies not delivered. In late December 2017, the tribunal appeared to confirm its May decision in further findings regarding the gas price. Naftogaz claimed victory, although Gazprom asserted that its core claims had been upheld. Naftogaz cited even higher figures for avoided penalties of $56 billion.5
A December 2017 decision in Stockholm confirmed Naftogaz’s claims of overdue payment for the purchase of Gazprom’s gas. At the same time, the court ruled that Ukraine should pay for at least 80 percent of the 5 bcm of gas it must import annually through 2019 under its contract with Gazprom.
Naftogaz has stated that unbundling its transmission and storage functions must wait until after the claim on transit is resolved. That decision is expected by February 2018.
Time weighs on the Naftogaz-Gazprom relationship. Their current gas transit contract expires at the end of 2019, and the Russian side is attempting to exert pressure on Ukraine as that deadline approaches. Gazprom has stated that it will cease transshipments across Ukraine as of 2019, and the Russian company is working with European partners to construct the Nord Stream 2 (NS2) gas pipeline, the second phase of a project that will closely follow the route of Nord Stream 1. The new line would double the capacity of the overall Nord Stream system to 110 bcm. Gazprom claims that NS2 will be operational in 2019, although the project faces potentially significant challenges from the European Commission and a handful of EU member states, as well as vocal opposition from the U.S. government.
If NS2 is implemented, Ukraine could lose up to $2 billion in transit revenues per year. It would also diminish Kyiv’s importance in the European energy market and overall security architecture. Ukraine’s decline from a major gas transit country to relatively marginal player could undermine the EU’s incentives for closer integration with the Ukrainian energy market.
For Ukraine to continue serving as a key transit country for Russian gas moving to the broader European market, Kyiv must commit to operating its gas transit system efficiently and transparently. Naftogaz subsidiary Ukrtransgaz has strategic assets that could serve as the foundation for this outcome—east-west transit capacity of 140 bcm per year (measured at the exit points to the EU) and roughly 15 bcm of available underground gas storage (out of their total capacity of 31 bcm).
Many analysts argue that securing a long-term role for Ukraine in the European energy security scene will require an effective unbundling of Naftogaz, improvement in regulatory processes, the establishment of a professional and impartial transmission system operator on the basis of EU law, and new investment for modernization of the system (perhaps from Western companies). In late 2017, Andriy Kobolev, the head of Naftogaz, stated that an agreement on foreign management of Ukraine’s gas transit system could be reached in the third quarter of 2018. The Ukrainian government has, in the same vein, solicited international interest in partnering to operate and manage Ukraine’s gas transmission system through the Main Gas Pipelines of Ukraine PJSC.
No Less Important: Ukraine’s Electric Power Sector
Ukraine’s electricity sector has received far less international attention than its gas sector, but it is just as consequential to the country’s economy and security. Although natural gas fuels the bulk of the heat supply through district heating systems, electricity powers the compressors and pumps that move heated water around the distribution networks to reach consumers.
Ukraine remains one of the largest electricity consumers in Europe, even after an economic contraction caused largely by the conflict in the country’s east. The country’s total installed capacity amounts to 55.3 gigawatts (GW), of which approximately 3.2 GW—mostly plants burning anthracite coal—have been affected by the conflict in eastern Ukraine. Thermal power plants still constitute the overwhelming majority of total installed capacity (24.5 GW), followed by nuclear power plants (13.8 GW), hydro (5.9 GW), and renewables (0.9 GW). Actual generation looks very different, however, with nuclear representing the largest share—56.5 percent of power generation in 2015, with plans for even higher shares in years ahead.
Ukraine’s electricity sector struggles with the challenges of supply security and operational security, pricing, and the need for modernization, all of which taken together amount to fundamental obstacles to consistent and stable operations. A great challenge to supply security has been the availability of A-grade, or anthracite, coal since the start of the conflict in eastern Ukraine. Although lower-quality G-grade, or bituminous, coal is available from mines in government-controlled parts of Ukraine, as well as from other countries, anthracite has historically been sourced from mines in Donetsk and Luhansk regions that are now controlled by separatist forces. Anthracite shipments from the east were increasingly obstructed by blockades and were fully suspended in mid-March 2017. Ukraine has been forced to import anthracite coal from abroad to make up for the loss of supply from the eastern provinces. This has not only cost the government more but exacerbated energy insecurity. In the first half of 2017, 91 percent of Ukraine’s 826,000 tons of imported anthracite came from Russia. In November 2017, the government of Ukraine announced its intention to have all Ukrainian thermal power plants operate without anthracite coal from 2019 and rely instead on lower-quality bituminous coal.
With regards to operational security, Ukraine’s power sector has been the target of some of the world’s most notorious cyber attacks. An attack on three regional distribution utilities in December 2015 was identified as the first publicly acknowledged cyber attack to result in a power outage. Other attacks, including on other industrial sectors in Ukraine, occurred in December 2016 and in the summer of 2017. Many cyber defense experts say that these experiences demonstrate both the importance of good basic cyber awareness and “hygiene” (such as using licensed, consistently updated versions of software), as well as establishing concerted sector-specific cyber defenses.
The electricity market has also faced chronic problems related to regulation, pricing, and commercial operations. The industry needs to generate enough funds on a sustained basis to support modernizing dilapidated infrastructure and facilitate the complex task of integration with the EU’s power system. Both generation and grid assets require substantial investments. Most of the power generation assets will reach the end of their life cycle during the next decade and will need to be decommissioned or upgraded; around 14 GW are due to be decommissioned by 2030. Almost all of Ukraine’s power plants date back to Soviet times, and around half of them are over forty years old. Furthermore, Ukraine’s power sector must meet EU environmental standards as a requirement under the EU Association Agreement.
The nuclear power sector, which has offered a critical lifeline to Ukraine, especially since the conflict with Russia started in 2014, also faces challenges and needs new investment. With fifteen active reactors, Ukraine ranks seventh among the world’s nuclear energy producers. The government not only plans to extend the operating life of the existing nuclear plants commissioned in the 1980s—the South-Ukraine NPP, units 1 and 2 of the Rivne NPP, and units 1 and 2 of the Zaporizhzhya NPP—but would also like to construct new units at the Khmelnytskyi power plant, aiming mainly for exports to Poland. Ukraine aims to diversify its nuclear fuel supplies and make its fuel cycle and nuclear waste management less dependent on Russia.
Renewable energy sources (RES) are likely to be the fastest growing source of power in Ukraine over the coming years, as the country will need to comply with EU directives and new projects are receiving fairly generous subsidies. Ukraine has undertaken to ensure that, by 2020, the share of RES in overall energy consumption will be 11 percent. RES accounted already for around 6.4 percent of the total electricity generation by January 2017. This is more than half of the 11 percent target stated in the National Renewable Energy Action Plan adopted in 2014.
Ukraine’s transmission and distribution network is also in need of investment and modernization. The transmission network is one of the least reliable in Europe. Technical losses in the transmission and distribution grids reach 12 percent—two and a half times higher than in OECD countries. Around $124 million was invested in 2015 into the transmission grid development, with more than 90 percent of the funds coming from the EBRD, but roughly $5.1 billion of additional investment is required. One additional major challenge will be the integration and technical synchronization of the Ukrainian grid with the EU grid (the ENTSO-E system). The 2035 Energy Strategy, adopted by the Ukrainian government in August 2017, stipulates that the synchronization should be achieved by 2025.
Creating a Level Playing Field
The health or frailty of a nation’s energy sector has a direct impact on broader economic development, and thus on the nation’s security. It should be clear from the discussion above that, in this context, Ukraine has significant work left to do in order to secure its energy future, its economy, and its national security. The timely implementation of restructuring is needed in the gas sector—and no less needed are new investments in the power sector and greater attention to the security of electricity systems and fuel supplies.
The single-most difficult question is the one that arches over all parts of the sector: Can Ukraine’s energy sector escape from the problems that arise when the industry is dominated by favored incumbents linked to certain industrial groups and political patrons? Competition based on transparent, economically grounded market rules can facilitate the introduction of new technologies, new functionality and services, and new sources of investment that have been in short supply in Ukraine for years.
This highlights the critical role of policymakers and regulators. As noted above, after the Euromaidan protests, the government undertook some bold steps toward reform of the electricity market. A phased electricity tariff plan envisaged a threefold price increase for households between 2015 and 2017, a step that has now been implemented. A further important step was the adoption of the 2016 law on the National Energy and Public Utilities Regulatory Commission (NEURC), establishing some clear responsibilities and powers for the regulator.
A major breakthrough was the adoption of the new Electricity Market Law in April 2017. The law introduces principles of fair competition and nondiscriminatory participation in the electricity market, equal rights to sell and buy electricity, free choice for consumers to select power suppliers, third-party access to transmission and distribution grids, and price- and tariff-setting that reflect actual costs. The law is designed to replace the current “single buyer” model that has continuously failed to provide incentives for investments into generation and grid development. NEURC has drafted the rules for the functioning of the new market and has held public consultations on a number of other important secondary legislation drafts (rules for transmission and distribution system operators).
Nonetheless, the challenges facing the Ukrainian energy sector are massive. As of the start of 2018, the internal power sector debt was $1.04 billion. The independence of the regulator continues to be a key challenge, without which the electricity market will fail to perform for benefit of the society and economy as a whole but will instead remain under heavy political influence.
The new Electricity Market Law will not take full effect until July 2019. During the transition period, there is a risk that opponents of the new law will either be able to obstruct its implementation or steer implementation in a manner that is favorable to their narrow interests. In this transition period, for example, prices for power generation will continue to be set by administrative decisions, and large consumers will continue to be supplied at regulated, subsidized prices. Rules about dispatch of power on the grid also are very consequential.
Perhaps no single decision has been subjected to more criticism by the general public than the “Rotterdam plus” formula, which was introduced by NEURC in 2016 as a basis for the calculation of the price that could be charged for coal supplied to the Ukrainian thermal power plants.6 In the view of many analysts, the DTEK conglomerate, which owns a commanding share of the thermal power generation across Ukraine as well as coal mines chiefly clustered in the non-government-controlled eastern regions, appeared ideally positioned to benefit from the new coal pricing scheme.
Privatization of key assets is, in theory, a useful instrument to limit the ability of government to interfere in the market or for the management of state-owned companies to lobby for their own narrow interests. However, the government’s appetite for privatizing assets is limited. Moreover, transferring available assets to already dominant private companies, as was the case in the autumn of 2017, when two regional energy companies were acquired by DTEK, only increases market concentration.
Ensuring the regulator’s independence from both the government as well as the market players requires a transparent regulatory process where NEURC would have to justify its major decision, providing access to background material, methodology, calculations and impact assessment. The early positive steps to improve the budgetary independence of NEURC has been limited by the inability to agree on the regulator’s top executive officers. The latest presidential decree, which authorizes Ukrainian President Petro Poroshenko to temporarily nominate these officers, is far from encouraging but perhaps necessary as a temporary measure.
Conclusion
If the proper functioning of a country’s energy sector is a vital component of its national health, as is argued through this publication, it is certainly not a simple task. More than a quarter century after achieving independence, Ukraine is still confronting this reality, and its economy and security suffer as a result. In the wake of Russia’s invasion and annexation of Crimea, and occupation of two regions in the eastern part of the country, Ukraine has intensified its energy reform efforts. Nonetheless, they remain unfinished. The risk for Ukraine today—especially if it now enters a period in which difficult policymaking gets crowded out by politically expedient maneuvers in the run-up to the 2019 elections—is that the country will fail to complete its energy reform agenda. The more favorable outcome, meanwhile, will be that the country does finish this critical work and enters into a period in which new, faster economic opportunity and growth are within reach. This is not an easy choice, but it is one for Ukraine itself to make.
Anton Antonenko is the vice president of DiXi Group. Roman Nitsovych is the DiXi Group program manager. Olena Pavlenko is the president of DiXi Group in Ukraine. Kristian Takac is a senior researcher at Globsec Policy Institute in Slovakia.
Notes
1One controversial element of the targeted gas and heat subsidies is that they result in direct payments to the companies supplying gas (the so-called oblgaz-zbuty) and heat. In turn, 70 percent of the oblgazes are operating under the brand of Regional Gas Company, which is an asset under the control of Dmytro Firtash, an oligarch facing extradition to the United States on money-laundering charges; for more information, see: Piotr Rozwałka and Hannes Tordengren, “The Ukrainian Residential Gas Sector: A Market Untapped,” Oxford Institute for Energy Studies, July 2016, https://www.oxfordenergy.org/wpcms/wp-content/uploads/2016/07/The-Ukrainian-residential-gas-sector-a-market-untapped-NG-109.pdf.
2 Some analysts note that gas now flowing in “reverse” mode to Ukraine from its western neighbors is actually nonetheless gas that those countries have purchased from Russia. The critical point, as far as Kyiv is concerned, is that the reverse-flow gas to Ukraine does not require payment to Russia, who the Ukrainian officials accuse of predatory pricing and sales practices.
3 First-time development of shale resources is admittedly not a trivial challenge. Rather, such development requires know-how, supply chains, permitting and approval processes, and other features not currently found in the Ukrainian oil and gas services market.
4 The Arbitration Institute of the Stockholm Chamber of Commerce does not publish information about the existence of cases it is considering, to say nothing of actual findings, so statements here about the arbitration findings are based on press reporting
5 Naftogaz commented that it never disputed its liability to pay for actually delivered gas.
6 The leadership of the regulator, NEURC, insists that this issue has been misconstrued by the general public and that this is a scheme that promotes transparency of pricing, not profits for DTEK and its owners in oligarch Rinat Akhmetov’s industrial group.
Corrections: A December 2017 decision in Stockholm confirmed Naftogaz’s claims of overdue payment for purchase of Gazprom’s gas, not for its transmission. Some 55 percent of gas is consumed by district heating companies and households with private heating systems in Ukraine, not 75 percent. Domestic gas production accounts for three-fifths of Ukrainian demand, not two-thirds.
