1. Energy Security Challenges in Ukraine: A snapshot 1

2. Energy security in Ukraine Who is responsible for energy security in Ukraine? What challenges to energy security are in legislation? What challenges to energy security are in management? What challenges to energy security are resource-based? 2

3. The purpose of this report To point out the need to develop an effective energy development strategy To provide an in-depth analysis of the contemporary state of the energy sector in Ukraine To determine the main symptoms and problems in the energy sector in order to find a way to cure them 3

4. Who “controls” the energy sector? 4 Central executive bodies Business International partners Consumers

5. Central executive bodies More than 15 government agencies are involved informing energy policy. On 7 July 2010, an Interagency Energy Development Commission was set up. 5 The Commission’s purpose is to: optimize the energy balance structure establish a positive investment climate research alternative energy sources

6. International partners 6 Russia Ukraine depends on Russian resources The EU Ukraine is involved in many EU energy initiatives The US The US works on its own strategic priorities in Ukraine

7. Legislative gaps lead to: 7 Lack of structural reform in the sector Absence of a system of control over strategic state decisions Corruption in the energy sector Lack of control over natural monopolies and independent regulation of their activities Ineffective rates for residential and industrial users

8. Strategy Ukraine’s Energy Strategy to 2030 is an unused basis for forming energy policy: 8 Adopting the Energy Strategy in 2006 failed to guarantee its enactment. The Strategy fails to rank its priorities. SInce its adoption, not a single effort has been made to improve it …

9. Two options for strategic energy planning 9 Update the current Strategy 1 Offer a new Strategy 2

10. Problems managing energy Planning and decision-making system centered in Moscow Closed, opaque actions of those in power Lack of a proper tracking system for energy Undiversified energy supply systems 10

11. Energy resources Ukraine covers less than 50% of its own energy needs. Extraction 11 Oil : 10–12% Natural gas : 20–25% Coal : 90-92%.

12. Gas, oil & coal: Common problems, missed opportunities Outdated extraction infastructure Resource depletion Inconsistent State policy Not the conditions for strategic investors 12

13. Atomic energy Ukraine’s total AES capacity is 7th in the world and 4th in Europe. Ukraine continues to build new energy blocks Ukraine is planning its own manufacture of domestic nuclear fuel for AESs 13

14. Ukraine’s electricity—not competitive Unified transmission system includes: – 8 regional power grids – 1 million km of power lines – 24 oblenergos (oblast power companies) and companies in Sevastopol, Kyiv and Crimea 14 No program to modernize the power grid Debts of over US $16bn on the wholesale electricity market

15. Renewable energy: Alternative sources Alternative energy supplies only 1-2% of domestic demand Ukraine’s priorities include bioenergy, windpower, mini-hydrolectric power, solar power, geothermal energy, and alternative gases 15

16. Renewable energy: Alternative sources Windpower potential is 330 million MWt. 16 Powerful hydroelectric resources are available in Ukraine’s small rivers, which could provide electricity to hard-to-reach rural areas but need government backing.

17. Renewable energy: Alternative sources Ukraine has huge deposits of “revolutionary” shale gas but extraction costs are high and serious investment is needed. 17 Biomass is used to produce biogas, biodiesel and bioethanol. Ukraine grows canola (rapeseed) for export to Europe.

18. Energy transit Exit throughput of GTS is 142bn cu m/year. Potential throughput is 175bn cu m. If GTS is modernized, theoretical throughput across Ukraine could be increased to over 230bn cu m/year. Poor technical state of GTS threatens Ukraine’s geostrategic position as the key transit link in the East- West pipeline system. 18

19. Nabucco pipeline 19

20. Whitestream pipeline 20

21. Transiting oil Until 2000, 65mn t/year of oil passed through Ukraine’s pipeline network, 50mn t of it in transit for export. By 2009, of only 38.5mn t/year, 29.1 was transiting for export. In 2002, construction of the 674-km Odesa-Brody pipeline as part of the Eurasian Oil Transport Corridor (EAOTC) was completed. 21

22. Ukrainian-style energy efficiency Ukraine’s GDP energy consumption is 2.6 times the average around the world. Corruption is the main reason. Energy efficiency is covered by more than 200 pieces of legislation: – 10 laws – 15 Presidential Decrees – 120 Cabinet resolutions and other legal acts Yet there’s no understandable mechanism for encouraging energy efficiency. 22

23. Project Strategic priorities for increasing Ukraine’s energy security to 2030 Goal: To establish the strategic priorities for increasing Ukraine’s energy security. Funding: UK Strategic Programme Fund, “Low Carbon, High Growth” programme 23 Foreign & Commonwealth Office

24. Products and events 24 Products Database National documents and international commitments Analytical Report “ Energy Security Challenges in Ukraine: A snapshot ” Analytical Brief “ Best international practice in energy security ” Green Paper “ Problems in Ukraine ’ s energy security to 2030 ” White Paper “ Strategic priorities for increasing Ukraine ’ s energy security to 2030 ” Events Expert Roundtable To discuss key problems in the energy sector 28 May 2010 Seminar To discuss analytical report 22 July 2010 Study Tour Tour to London and Brussels to learn about best practice Roundtable To discuss Green Paper Roundtable To discuss White Paper