Ukraine’s Naftogaz to receive $300m loan from EBRD to buy natural gas

Ukraine’s national gas and oil company Naftogaz will receive a $300m grant from the European Bank for Reconstruction and Development (EBRD) to purchase natural gas from the European market to meet demand during winter season.

The loan, which is linked to an earlier Naftogaz pipeline project, is expected to bolster energy security in Ukraine by supporting diversification of natural gas suppliers as well as delivery routes.

The Naftogaz pipeline project was aimed at modernising and repairing a key section of Ukraine’s gas transmission system, the western part of the Urengoy-Pomary-Uzhgorod pipeline.

EBRD and Ukraine signed the project in December 2014.

The pipeline transports gas from Russia towards European markets and also allows for reverse gas flows from the EU to Ukraine.

The two projects have been designed to stimulate reforms in the Ukrainian gas market and are expected to strengthen corporate governance at Naftogaz.

Further, they will also introduce transparency in the company’s purchases of natural gas.

Naftogaz would use the proceeds from the loan in compliance with the EBRD’s Procurement Policies and Rules, best European practice and the European Federation of Energy Traders documentation.

EBRD Energy and Natural Resources managing director Riccardo Puliti said: "This project is another important landmark in the reform of Ukraine’s gas sector.

"Our loan will support key areas such as the establishment of a truly independent regulator, the improvement of tariff methodology as well as the introduction of a gas network code."

The EBRD-Ukraine Multi-Donor Account will provide the technical assistance for the implementation of a corporate governance action plan for Naftogaz.

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Image: Naftogaz will purchase natural gas in Ukraine with EBRD’s loan. Photo: courtesy of European Bank for Reconstruction and Development.