The Parliament of Ukraine has on 8 July 2010 adopted Law No. 2467-VI "On Basic Principles of the Natural Gas Market Functioning" (hereinafter – the "Law"). The Law was adopted in compliance with EU Directive No. 2003/55 EC dated 26 June 2003 and its primary goal is the liberalisation of the Ukrainian natural gas market.
 
The main provisions of the Law include the following:

  • all market players shall enjoy equal rights of access to the national gas transportation system ("GTS"). The grounds for refusing access to GTS have been limited to those set out in the Law.
  • a company involved in gas transportation is not permitted to perform any natural gas production and supply related business activity nor may a gas distribution company be engaged in any gas production, supply, storage and transportation activities;
  • in the event that companies are vertically integrated, the transportation and distribution activities must be legally and functionally separate from other activities (such as gas production and supply). In particular, (i) positions in these companies may not overlap; and (ii) the decision-making process should be independent. Per the Law,  this separation (i.e., primarily, that of Naftogaz, Ukraine) shall be implemented from 1 January 2012;
  • "qualified" consumers will be free to choose their gas suppliers. The qualification criteria shall be established by the National Energy Regulation Commission (NERC) for each specific class of consumers (starting from 1 January 2012). However, according to the Law, all consumers should be "qualified" no later than 1 January 2015;
  • the price at which any particular entity in which the State holds a 50% or greater stake (including under joint activity agreement) shall sell the produced natural gas to another entity (i.e., Naftogaz) as designated by the Cabinet of Ministers of Ukraine (CMU) shall be set by NERC. This gas shall be supplied by the so-called "guaranteed gas suppliers" to the consumers. Starting from 1 January 2012 CMU shall determine which companies qualify as "guaranteed suppliers";
  • gas suppliers shall ensure a 100% pre-payment for any natural gas purchased for the purpose of supplying qualified consumers;
  • gas producers may set the price for any natural gas that produce and sell independently from NERC;
  • the Law contains a wide list of possible offences for which NERC is authorised to sanction the offending market players (including fines in amount of approx. EUR 82 700).

Law: the Law of Ukraine No 2467-VI "On Basic Principles of the Natural Gas Market Functioning" dated 8 July 2010

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The original publication date for this article was 28/07/2010.