Ukraine Encourages the EU Suppliers to Store Gas in Ukraine

On 4 April 2017 the Ministry of Finance of Ukraine Order No. 292 "On Approval of Amendments to Certain Legal Acts" (the "Order"), adopted on 27 February 2017, came into force. The Order permits storage of imported gas in the regime of “customs warehouse” and stipulates use of backhaul operations.

Storage of Gas in the Regime of "Customs Warehouse"

According to the Order, customs clearance of gas transported to Ukraine by a non-resident for purposes of storage at gas storages shall be made in the regime of “customs warehouse”, which allows non-residents not to pay the 20% import VAT. This novelty enables European partners to order from PJSC "Ukrtransgaz" services for storage of natural gas for a period of up to three years. At the same time, non-residents can transfer title to the gas kept in gas storage facilities under the "customs warehouse" regime provided that the customs regime of such gas is changed to a regime which envisages payment of VAT. The Order foresees the additional declaration for customs clearance.

Before these changes came into force non-residents could store gas in Ukraine only under the transit regime which did not allow storing gas for more than 31 days.

Although "customs warehouse" regime does not require payment of VAT by non-residents, non-residents still have to pay fees for usage entry and exit points of transmission system. For some of the exit points which are the most interesting for the EU suppliers the exit tariff has not been established yet by Ukrainian Regulator.

This Order creates legislative conditions for formation of "customs warehouses" for storage of natural gas on the basis of Ukrainian gas storage facilities and constitutes the next step for the integration of the Ukrainian GTS into the European GTS.

Backhaul Operations

Prior to this, on 4 February 2016, with the adoption of the Law of Ukraine "On Amendments to the Customs Code of Ukraine to Create Conditions for Implementation of a New Model of the Natural Gas Market" No. 994-VIII the Parliament of Ukraine decided to grant PJSC "Ukrtransgaz" the right to conduct gas transmission as backhaul operations (i.e. virtual reverse gas operations).

Backhaul operations are determined in the Order as the GTS Operator’s replacement of the original amount of gas (transported under the periodic customs declaration) with the relevant amount of gas already kept in gas storages or located in the GTS of Ukraine. Customs clearance of such gas shall be performed on the basis of the data on the original amount of gas, which is subject to replacement.

For further information please contact Asters' counsel Yaroslav Petrov
and senior associate Marta Halabala.

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