France's Engie to supply gas in Ukraine

France's Engie to supply gas in Ukraine
A large European company decided to enter the Ukrainian gas market, not only to supply gas but also to use the country's underground storage facilities. Experts admit the Russian Gazprom may respond as it still can't get over losing Ukraine.

One of Europe's major energy companies, France's Engie (GDF Suez) with an annual turnover of around EUR 60 billion, will be the official supplier of natural gas to Ukraine from the European market, where the main players are Norway, Russia, and Algeria. And most importantly – it will be the first European company to be allowed to store gas in Ukraine's underground storage facilities (USF). A preliminary agreement was signed in the presence of Prime Minister of Ukraine Volodymyr Groysman and Minister of Economy and Finance of France Michel Sapin within a framework of a business forum held in Paris October 28. Engie has already opened its subsidiary in Ukraine.

The news on the European gas pioneer on the Ukrainian market has caused quite a stir. However, Naftogaz had already reported on negotiations on the matter earlier this summer. In June, Naftogaz CEO Andriy Kobolev said that a large international company from France is planning to take a loan from the IFC to buy gas and then sell it to Naftogaz at a market price. However, he had not specified the name of the company back then. And now, in October, a preliminary agreement was signed off, which after a series of technical procedures within two to three months will start being implemented.

After the signing in Paris, Kobolev said: "The entry of a powerful European player to the Ukrainian market is a good signal for other European companies. We are pleased to see that the reform of Naftogaz and the [gas] market is working."

The experts agree with him but at the same time, they note that Ukraine already has a dozen of other European gas suppliers, some of them no less powerful than Engie: Germany's Uniper Global, U.S.-based Noble, Italy's Eni, and Swiss Axpo Trading. The main thing is not the exclusivity of the preliminary deal but the fact that foreign companies are beginning to cooperate more actively with Ukraine due to the implementation of the gas market reform, the implementation of the European energy strategy that provides for free competition in the fuel supply market.

According to the expert, president of the Strategy XXI Center Mykhailo Honchar, the Ukrainian gas market is now very attractive after the unification of prices, setting conditionally market prices on the national market.

"The volume of gas supplies to Ukraine will remain a meaningful share for European companies: a few billion dollars is a large sum which will be fought for. Everything that Gazprom has lost as a result of a reckless government and corporate policy, has been gained by its European partners," said Honchar.
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