Kiev (Platts)--7Jul2014/650 am EDT/1050 GMT

Russian company Gazprom will not be allowed to buy shares in the Ukrainian gas transportation system, Andriy Kobolev, the head of Naftogaz Ukrayiny, said Sunday.

Kobolev cited European Union regulations barring gas producers, such as Gazprom, from owning a controlling stake in gas transportation systems.

"In this regard, I want to draw attention to the experience of European countries," Kobolev said in an interview with Ukrayina television aired late Sunday. "Despite all the efforts and desires, Gazprom could not gain control over any large gas transportation system in the EU."

Ukraine, although not a member of the EU, would probably use the same legal means of keeping Gazprom away from its gas transportation system, he said. "Practice has shown that such mechanisms are effective and Ukraine in this respect is not unique," Kobolev said. "We can do the same."

The comment comes days after Ukraine's parliament approved in the first reading a government bill to reform the energy sector by splitting Naftogaz into two companies, comprising a gas transportation unit and a gas storage unit.

The bill would also allow European or US energy companies to operate both units.

"We are talking about large European companies that operate gas transportation systems and can bring in their experience, money and, most importantly, they can guarantee transit of this gas via the territory of Ukraine," Kobolev said.

Gazprom on June 16 completely cut gas supplies to Ukraine, citing a disagreement over gas prices and debt repayments with Naftogaz. Gazprom, however, continues to supply gas to Europe via the Ukrainian gas transportation system. Russia moves more than a half of its Europe-bound gas supplies via Ukraine.

Ukraine currently moves about 85 billion cubic meters of Russian gas to Europe annually, down from 104 Bcm/year in 2011, according to the energy and coal industry ministry.

The decline in gas supplies transiting Ukraine follows the launch of Nord Stream, a Russian gas pipeline that runs directly from Russia through Baltic Sea to Germany, in 2010.

Ukraine's gas transportation system is capable of moving up to 120 Bcm of Russian gas to Europe annually.

--Alexander Bor, newsdesk@platts.com
--Edited by Alisdair Bowles, alisdair.bowles@platts.com

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