Legal inconsistency in gas metering may block operations of Ukrainian UGS CBW
From April 1, 2021, the Energy Customs of the State Customs Service of Ukraine began processing customs declaration on natural gas stored in the Ukrainian underground gas storage (UGS) under the customs bonded warehouse (CBW) regime exclusively in energy units (kWh). The state body is guided by the norms established by the Law of Ukraine “On the Customs Tariff of Ukraine” № 674-IX of June 4, 2020. It requires additional accounting of natural gas in energy units.
At the same time, the Draft Law № 2553 “On Amendments to Certain Laws of Ukraine Concerning the Introduction of Accounting and Calculations on the Volume of Gas in Units of Energy”, which was initiated December 16, 2019, as provisioning such a transfer from May 1, 2021, has not been adopted since that time. The Draft Law № 2553 has been considered and passed by the Energy Parliamentary Committee, and is awaiting a second reading and endorsement by the Parliament of Ukraine.
Thus, it is currently legally impossible to comply with the requirements of Law № 674-IX as the Draft Law № 2553 is not in force, as well as other related legal and regulatory frameworks.
The JSC Ukrtransgaz, as the Ukrainian UGS operator works with customs authorities and other stakeholders to resolve this legal collision, which pose artificial bars for participants in the gas market of Ukraine. Delays in resolving the issue will result in significant financial losses to incur by the Ukrainian UGS operator and gas traders of Ukraine and the EU operating in Ukraine.
Moreover, it will defame the services of the Ukrainian UGS in the eyes of foreign customers, non-resident companies from 24 foreign countries in 2020 storing their 10 bcm of natural gas under CBW regime in Ukraine and capitalized on exemption from customs duties and VAT for 1095 days. That has become one of the key attractiveness of the Ukrainian UGS over its EU-based counterparts, which is currently endangered due to unresolved legal collisions of Ukraine.