Interview of Oleksandr Ovdiienko, Director of the Natural Gas Supply Department of the Spivdruzhnist SE and the Deputy General Director of the company about the today`s state of the energy sector if Ukraine.
In business environments Quite often one can observe a situation where large enterprises try to isolate themselves from the problems in the state as much as possible, but at the same time they actively lobby their interests. This has no positive effect on business or on the development of countries, especially if it concerns the weak economies. Of course, there are also such examples in Ukraine, but they are rather an exception than a rule.
This was convinced by Oleksandr Ovdiienko, Director of the Natural Gas Supply Department of the Spivdruzhnist and the Deputy General Director of the company. He does not consider himself separate from the state and assumes the same obligations as the leaders of the country – to develop the energy sector, including gas distribution. Oleksandr Ovdiienko told LDaily why we have not become a competitive country in this direction and that prevents us from attracting investors to the industry.
LDaily: The energy sector and its development in Ukraine are the top theme. Officials and politicians talk a lot about this and, in their words, are searching the different ways to develop this sector. But what actually happens in the energy market?
O. Ovdiienko: Over the past few years, the state has invested very little in the development of infrastructure, particularly in the energy sector. This badly affected the state of the market, because energy is a bloodcirculatory system of the economy: the economy without it is impossible. No investor will have to build a plant unless it can be connected to electricity, gas, water, etc. We, as a country, must develop this industry. We adopted the energy strategy, registered the main indicators, took the vector to increase the role of green energy. We began to introduce European rules into the Ukrainian market. But its members are little aware of them. That’s why in 2014 we with other like-minded people created the Association of Gas Market, which united independent gas traders, gas suppliers with special obligations and gas distribution companies. We are currently working with them and with consumers, explaining how this market will function.
LDaily: What results did Association achieve during the four years?
O. Ovdiienko: We are regular members of the Verkhovna Rada Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety. We are currently working on amending the adopted law on the natural gas market. Also we have established direct contact and good relations with the Secretariat of the European Energy Community.
This is a fairly large segment of work, because, as a state, we are obliged to fulfill the requirements of the EU and implement the relevant directives. And the Secretariat controls whether we are doing it right. Therefore, such direct contact is very important for us, so that we do not make false steps and understand how to fulfill the requirements properly, otherwise penal sanctions may be applied to the country.
LDaily: Active cooperation with the European Union is becoming a decisive factor for the investors. Are there any potential contributors already?
O. Ovdiienko: For today I do not see such investors for various reasons.
Besides, a number of infrastructure companies have left Ukraine. And this fact has a big negative impact to the image of the country. Unfortunately, today we have more present «traders», who are not interested in infrastructure, but only in the use of the market situation.
Therefore, the great role of our state agencies is precisely in creating the right image of Ukraine in order to attract a strategic investor interested in the infrastructure development.
LDaily: But despite the lack of investors, do you agree that 2017 was a breakthrough year for the industry?
O. Ovdiienko: Basing on balances of energy consumption, I have not noticed this yet. Currently, the population of Ukraine is the main consumer of energy resources. Previously, the situation was different: the population consumed 20% of the overall balance of energy resources, and the main consumption was by industry. Today, the population consumes more than 60% of its needs. And consumption by industry reached the lowest level. We hope that it will not fall below this level, and soon we will see increase in demand.
LDaily: How much time does the industry need to return the desired performance?
O. Ovdiienko: I hope that we will reach the 20% rate of the population consumption by using effective thermomodernization and increasing energy efficiency by the citizens themselves. Moreover, most of these figures are the result of inefficient consumption resulting in significant losses in energy supplies. The reason is our non-energy efficient buildings, including residential buildings, and we need to spend a lot of energy in order to create normal conditions there.
LDaily: What is happening with the energy industry in Europe now? Is the population also the main consumer?
O. Ovdiienko: There, these figures are significantly lower. It is worth noting that the population in Europe, on the one hand, is consuming more efficiently. On the other hand, they have professionally developed system of tariff formation. For example, in the EU, incentive tariff setting is applied, ie for a gas company, a tariff is set for 3-5 years. During this time it can be reviewed in case of some fluctuations in the market. As a rule, this happens rarely. But at the same time companies know what kind of money they will receive and, based on this, build business plans.
Unfortunately, in our country, gas distribution companies have no opportunity to pay adequate salaries to their employees. The model for constructing tariffs, the decision-making system, which has been operating for the last five years, does not involve the development of enterprises. And while there is a political struggle in our country, the industry is dying. Plus, the outflow of professionals from the industry is extremely high.
For many years, we have never had such that even locksmiths and welders went from the gas distribution companies to the water utilities, because there are better working conditions.
LDaily: On your opinion, what has led to such a crisis situation in the industry?
O. Ovdiienko: Unprofessional managers and romanticism of young officials today undermine the investment attractiveness of the country and the energy sector. This, in it`s turn, shows how energy is actually managed to international partners.
Until we do not feel positive results from the state’s influence on the energy market – until the industry is in a deep crisis. And 2016-2017 years have become a turning point in the distribution of gas, but in another direction. Today we are still working at the normal level. If we live in this way for another year, then, unfortunately, we will not be able to guarantee the safety and absence of emergency situations. Because we will not have money. Gas is a dangerous substance, it can explode. And this can happen more often, because the networks are not upgraded in sufficient quantities. If we as society are satisfied with such situation – so we will develop in such way. If we want security, then we must understand that the modernization of gas pipelines is indispensable for all of us. In this context, it is worth mention about our roads. It’s impossible to speak about their condition without emotions, and this is despite the fact that they (the roads) are in sight. And what about the infrastructure that is hidden from the eyes? Do we really think that it is in a better condition?
Unfortunately, we are too hasty in the reforms, but at the same time we are late. The system of civil service that exists now is not bad. It has a lot of adequate people working there, but they do not have time to think. Because the whole system is built in such a way that the decision must be taken yesterday. I believe it is necessary to stop this trend. We need normal strategic plans and their implementation step by step. When a strategic investor sees that we are fulfilling our promises and plans, it will become much more trusted to us.
LDaily: Practice shows that Ukrainian officials do not always fulfill their promises.
O. Ovdiienko: Yes, you are right. This is also the case in our industry. For example, on a certain romanticism, we declared and adopted strategies for a global desire to increase the power of renewable energy, and then, when a serious conversation began, we began talking about system constraints. Here we need to be as consistent as possible, we must agree on the rules of the game before the beginning of the process.
If we declare that we, as a country, want and accept strategic documents, we must not talk about these restrictions, but do our best to remove them.
After all, when an investor comes to build a station, it will be uninteresting whether we have restrictions or not. Its task is to invest in profitable business.