Government – Supervisory Board – Naftogaz: cooperating effectively for a common goal
1. Government –
Supervisory Board –
Naftogaz:
cooperating effectively
for a common goal
23 February 2018, Kyiv
CLARE SPOTTISWOODE
Сhair of Supervisory Board, Naftogaz
2. Ukrainian gas market outlook
2
Where we are Where we go
Significant gas imports
Monopoly in retail
Losses from corruption
Gas transit after 2019?
Inefficient consumption
Self-sufficient in gas
Effective competition in retail
Encouraging renewable energy
Reliable European TSO
Incentives to be energy efficient
Reform
5. Regulatory regime for
upstream to flourish?
5
3rd
largest gas
reserves in
Europe are
in Ukraine
36%
of Ukraine’s
gas demand
is still covered
by imports
(European standards)
• Incentivize investment and
reward success
• Tax away excess profits
• Make sure no one sits on licenses
without drilling
Simple and
transparent
“one-stop”
licensing
Sell at
market
price
Fair taxation
regime
Non-
discriminatory
access to
pipelines and
data
Protection of
property rights
6. 6
British unbundling case
Stage 2: Privatization
• 100% sold to shareholders
• 100% monopoly overseen
by independent regulator
Independent
Regulator
8. Why did we unbundle
in the UK?
• To introduce effective competition
– Lower prices
– Higher quality of service
– Innovation in services
• To remove incentives to misbehave
9. Roles of players in British gas market
after the unbundling
9
Government Companies Independent regulator
Sets policy
for all companies
Do their job Does what is right
for the market
• Taxation and
PSO regime
• Policy for
energy security
• Broad license
parameters
• Compete for
customers
• Be efficient
• Enable fair
returns
• Encourage
efficiency
• Ensure
appropriate
investment
10. Roles of players in British companies
after the reform
10
Shareholder Supervisory board Management
• Decides to keep
or sell
• Holds management
accountable
• Receives
dividends
• Works together with
management on:
- Creating strategy
- Creating budgets
• Implements
the strategy
• Appoints
professional
supervisory board
• Hires and fires
management
• Works together with
supervisory board on:
- Creating strategy
- Creating budgets
Type of shareholder (state or private) is irrelevant
Government creates policy
11. Corporate governance reform:
how to empower the supervisory board
11
OECD principles-based
corporate governance in
state-owned enterprises
prevents corruption
NABU, SAP and Anti-
Corruption Court
investigate and
prosecute corruption
12. What needs to be done in Ukraine for
successful unbundling?
12
50%of Russian gas
transits to EU
via Ukraine
1
Gazprom is the
only client that
uses UA system
for transit
Introduce more potential
users of the system
Ensure competitive transit
fees and system’s reliability
Build efficient TSO with
top-notch corporate
governance system
Engage a reputable
partner
Ensure independence
and quality of regulator