New Law on certification of the gas storage operator according to European rules

On 29 December 2022, the President of Ukraine signed the Law of Ukraine No. 2850-ІХ "On Amendments to Certain Laws of Ukraine (Regarding the Certification of the Gas Storage Operator and the Continuation of Measures to Prevent the Bankruptcy of the State Joint Stock Company Chornomornaftogaz)" (hereinafter - the Law), which establishes the general principles for the certification of the Ukrainian gas storage operator in accordance with the requirements of EU legislation.

The Law adapts the legislation in accordance with Regulations (EC) No 715/2009 and No 2017/1938 and will allow Ukrtransgaz, the gas storage operator, to store strategic gas reserves of EU countries. The amendments provide for:

  • Expansion of the National Energy and Utilities Regulatory Commission’s (the "NEURC", the "Regulator") powers
  • New requirements to the activities of Ukrtransgaz

Expansion of the National Energy and Utilities Regulatory Commission's competence

The NEURC will certify gas storage operators, for which it must approve the relevant procedure within two months from the date of publication of the Law. On 13 December, the Regulator approved the draft of such procedure and now comments and suggestions are being made to it.

Thus, the NEURC's preliminary decision on certification or its refusal is made no later than 60 working days from the date of receipt of the request and all necessary information. Later, such a decision with all relevant information is reported to the Energy Community Secretariat (hereinafter - the Secretariat) for its opinion. Within 25 working days from the date of receipt of the conclusion, the NEURC makes the final decision on certification or its refusal. The certified gas storage operator must notify the Regulator of the planned date of commissioning of the gas storage facility 30 days before such date.

In addition, the NEURC during certification must check the operator to prevent risks arising from:

  • Affiliation of the gas storage operator with legal entities, participants or ultimate beneficiaries of which are persons or the state recognized by the aggressor, invader or legal entities that may threaten the security of gas supply to Ukraine or other member states of the Energy Community. In this case, the relationship extends not only to corporate rights, but also to gas supply or other commercial relations
  • The rights and obligations of the Energy Community towards a state that is not a party to the Community
  • The rights and obligations of Ukraine towards a state that is not a party to the Energy Community on the basis of international treaties of Ukraine concluded with such state, provided that such rights and obligations do not contradict the Treaty establishing the Energy Community
  • Any other circumstances that are important for the security of natural gas supply

The gas storage operator will be preliminarily denied certification if the person who controls its activities or has corporate rights may jeopardize the security of gas supply and the interests of the Energy Community or its member states. However, the NEURC may pre-certify the gas storage operator with conditions to reduce potential risks. In particular, such conditions are the transfer by its owner of the rights to manage the gas storage facility to another person. If such conditions cannot eliminate the risks, the regulator refuses to certify and:

  • Requires the owner to alienate corporate rights or ownership within a certain period of time
  • If necessary, sets restrictions for such a person to use any control or rights over the gas storage facilities until the alienation of corporate and ownership rights
  • Determines compensation measures through the establishment of restrictions

The NEURC will also conduct inspections of the certified gas storage operator. In case of violations, the operator should eliminate them within a period not exceeding two months and set by the regulator. If the gas storage operator fails to eliminate the violations, the NEURC reconsiders the decision on certification taking into account such facts.

We note that the certification requirement does not apply to the capacities of liquefied natural gas "LNG" facilities, which are intended for storage of natural gas.

New requirements for the activities of Ukrtransgaz

Ukrtransgaz, as the operator of the state-owned gas storage facility, must submit a request for certification within one month from the date of entry into force of the procedure.

It should also inform the Ministry of Energy of Ukraine (hereinafter - the Ministry of Energy) and the NEURC about the actual level of filling of the gas storage facility on a monthly basis. The Ministry of Energy annually develops a schedule for filling the storage facility and submits the draft schedule for consultations to the Energy Community Secretariat. The Ministry of Energy informs the Secretariat on a monthly basis about the level of filling of storage facilities during the year.

Ukrtransgaz has the right to decommission a gas storage facility if it is impossible to continue to comply with the technical conditions and safety standards or the conclusion of the NEURC, taking into account the conclusions of the Secretariat and the Ministry of Energy, if this does not reduce the level of security of gas supplies to Ukraine or within the Energy Community. In this case, the gas storage operator notifies the NEURC no later than 12 months before the planned decommissioning date. If decommissioning is impossible, the operator will be able to receive compensation.

The law entered into force on 1 January 2023 and brought Ukrainian legislation one step closer to the EU legislation. In addition, EU countries will be able to strengthen their energy independence by increasing the volume of gas storage facilities, and Ukraine will further strengthen its partnership with the EU.

For more information, please contact Asters' Partner Yaroslav Petrov.

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