Vocabulary

Reciprocity – взаємодія; взаємність

commitment – зобов’язання

emission – викид

distort – спотворювати

incipient – початковий

assess – оцінювати

incentive – стимул

favour – ставитися прихильно

restrict – обмежувати

entrant – учасник

subsidу – дотація

Assignments

1. Read, translate and give the gist of text 12.

2. Make up a plan of the text.

3. Speak on:

- The benefits of the development of regional electricity markets;

- The main barriers to the international electricity trade;

- The influence of fuel markets on electricity markets.

Text 13. Energy Market of Ukraine

The energy sector is of key importance for the national economic development, as both production and municipal facilities require electric power for their operation. The energy sector peculiarity is that the technological equipment and primary generators of electric energy are separated from consumers. As a result, power generation, transmission and distribution have become separate industries.

With the purpose of optimization of the structure of electric power generation and sale in Ukraine, the wholesale electric power market has been created that is functioning on the basis of long-term contracts between generators, consumers of electric power, transmission enterprises with centralized (operative and technical) management of united power system of the country.

Large energy enterprises have been established in Ukraine, such as Donbasenergo, Dniproenergo, Kharkivenergo, Vinnytsyaenergo, Lvivenergo, Odesaenergo and Crimeaenergo that, in conjunction with other oblast energy companies, make up the Power Grid of Ukraine. The latter is connected with power systems of Western and Central European countries, as well as the CIS countries, including primarily Russia, Moldova and Belarus. The sector restructuring shows itself in separation of generating companies from power supply companies, which favours regularization and commercialization of the energy market of Ukraine.

Ukraine is well positioned to become a major transport hub for European oil and gas markets. In order to take advantage of rising energy demand in Europe, Ukraine must make some concrete decisions about the management of its strategic assets: the Odessa-Brody pipeline and the International Gas Transit System.

The challenge for Ukraine is to fill the Odessa-Brody pipeline and oil terminal at Pivdenny to assure the necessary financing and attract commitments from oil companies to provide long-term supply. The Odessa-Brody pipeline is strategically important for Ukraine as it provides oil supply diversity and also promotes integration into Europe by linking Caspian oil supplier in the East with European consumers in the West. The U.S. is committed to assist Ukraine in developing this project. The U.S. has funded a strategic business advisor for Ukrtransnafta, the company that owns the pipeline, and has funded a research of the market demand for Caspian crude in Eastern Europe. The analysis has shown that current market conditions for oil transportation to Eastern Europe are extremely rough. A combination of factors including the low price of oil in world markets and Russia’s discounting on Urals crude sold in Eastern Europe will make it difficult for Odessa-Brody to be competitive in the short run. The outlook for the medium and long term prospects is much more promising.

Demand for gas in Europe is rising. Some of the richest gas sources are found in Russia. Speaking geographically, Ukraine is located between the demand and supply. This strategic position gives Ukraine a great opportunity. Whether Ukraine will benefit from this opportunity depends on its own actions. Ukraine must demonstrate that its gas pipeline system is reliable and cost efficient. One way to improve the management of the current gas transit system is to form a consortium of Ukrainian, Russian and international companies to manage the system. Another way is to move away from barter transactions to a cash only operation. There are several benefits of transparent, international management of the gas pipeline system: revenues to the budget will increase, as well as the funds available to purchase fuel and opportunities for corruption will diminish.

The benefits of energy market reforms are not just technical. Energy sector reforms strengthen national security, improve economic competitiveness, increase jobs and wages paid, and standards of living. In addition, Ukraine’s energy policy is a key component of its relationship with Europe. A well managed, well-maintained and reliable international oil and gas transportation system serves both economic and strategic interests of Ukraine as well as Europe.