New operator of Ukraine's GTS to be under Naftogaz's management until January 1

Ukraine's government has amended a resolution on the unbundling of the gas transportation system (GTS) in line with the ownership unbundling model and transferred a new operator of Ukraine's GTS, PJSC Mahistralni Gazoprovody Ukrainy (Trunk Gas Pipelines), or the MGU, under from NJSC Naftogaz of Ukraine's management until January 1, 2020.

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Under a Cabinet resolution dated June 5, 2019, the government instructed the Energy and Coal Industry Ministry and the Economic Development and Trade Ministry to draft an act on transferring MGU-related corporate governance rights to Naftogaz. The document is to stipulate the unconditional return of the corporate governance rights from Naftogaz to the Energy and Coal Industry Ministry no later than January 1, 2020.

The Cabinet also obliged the relevant agencies to submit to the government a draft act to designate the MGU as the asset manager of the state-run gas transport system operator Ukrtransgaz or as possessor of the assets based on the property right.

Moreover, the government instructed Naftogaz and the MGU to submit an application to the National Energy and Utilities Regulatory Commission (NEURC) before August 1 for licensing of the GTS operator, as well as documents for setting tariffs for natural gas transportation services.

UNIAN memo. In early November 2016, Ukraine's government decided to create a new operator of Ukraine's GTS, namely PJSC Mahistralni Gazoprovody Ukrainy (Trunk Gas Pipelines). At the same time, Naftogaz's management created a new subsidiary, the Operator of the Ukrainian GTS, within the structure of state-run Ukrtransgaz, which is wholly owned by Naftogaz.

Naftogaz believes that the establishment of a new legal entity and the involvement of a European partner in its management are necessary for European companies to be able to buy gas on the eastern border of Ukraine and transfer it to the European market, preserving transit volumes after the current contract with Russia's Gazprom expires.

In early 2019, Naftogaz created a new company, the Operator of the Ukrainian GTS, fully owned by Ukrtransgaz, as part of the next stage of unbundling the GTS operator and attracting a European partner to its management.