The European Bank for Reconstruction and Development (EBRD) will lend Ukraine $200 million for the upgrading by Ukrainian pipeline operator Ukrtransgaz of the Urengoy-Pomary-Uzhgorod gas pipeline, which supplies Russian gas to Europe.

The loan has been approved by the EBRD Board, the Bank told Interfax-Ukraine on Thursday.

The project, which will be implemented by PJSC Ukrtransgaz, consists of the replacement of four sections of the Urengoy-Pomary-Uzhgorod gas pipeline, which are in need of repair as well as the modernization of the Romny gas compression station, the EBRD said.

A well informed source in the gas sector told Interfax-Ukraine that the project is to be signed on December 15, 2014, during Ukrainian Prime Minister Arseniy Yatseniuk's visit to Brussels.

As was reported, Ukraine's Cabinet of Ministers on October 22, 2014, issued resolution No. 1143-r to borrow up to EUR 150 million from the European Investment Bank (EIB) and up to $200 million from the EBRD to upgrade the Urengoy-Pomary-Uzhgorod gas pipeline. In keeping with the resolution, the funds will be transferred to state-run Ukrtransgaz as a subloan at 2% per annum to implement the pipeline modernization project.

Ukraine and the EIB on December 1, 2014 signed a EUR150 million loan agreement to finance the modernization of the Urengoy-Pomary-Uzhgorod trunk gas pipeline.

Ukrtransgaz, which is 100% owned by Naftogaz Ukrainy, operates a system of trunk pipelines and 12 underground storage facilities in Ukraine. The capacity of Ukraine's gas transport system is 288 billion cubic meters (bcm) at the entrance and 178.5 bcm at the exit, of which 142.5 bcm goes to European countries and 3.5 bcm goes to Moldova.