The operators of the gas transportation system in Ukraine and Poland, Uktransgaz and Gaz-System S.A., have signed an agreement that sets down the terms for cooperating in the design and construction of a gas interconnection, Ukrtransgaz has reported.

The planned Poland-Ukraine gas interconnector includes the construction of a new gas pipeline between the Hermanowice gas node on the Polish side and Bilche Volytsia on the Ukrainian side. The pipeline will have capacity for up to 5 billion cubic meters (bcm) a year in 2020, when the upgrading of the gas transportation system in Poland is completed.

The agreement sets out the rules for cooperation in the design phase and, depending on the investment decision, the future implementation phase. It provides for carrying out Open Season procedures for substantiating the feasibility of the gas transportation system expansion, primarily to confirm actual market interest. Based on the results of those procedures, the companies will make a final investment decision, given clearance from national regulators and in accordance with the Polish and Ukrainian law.

The interconnector will be vital for ensuring gas transportation from the planned Northern Gate gas pipeline (the Norwegian corridor and the LNG terminal) to Eastern Europe. The project will provide significant diversification of gas supplies to Ukraine (new sources of gas, including LNG) and integrate regional gas markets.

"Integration of the Polish and Ukrainian gas transportation systems is part of the North-South Gas Corridor, which will make it possible to ship gas from the LNG terminal in Swinoujscie through the countries of Central and Eastern Europe using cross-border interconnections. The overall goal is creation of flexible transportation infrastructure in Central and Eastern Europe that will make it possible to unite Western gas markets and the global LNG market to markets in Central and Eastern Europe," the statement says.

The Energy Community on October 14, 2016 recommended that the interconnection project be given EU Project of Mutual Interest (PMI) status.

Ukrtransgaz and Gaz-System signed an agreement on cooperation in preparing the feasibility study for the project on December 17, 2014. That agreement calls for linking Ukraine's gas transportation system to Europe via Poland and also provision of European gas storage services by Ukraine, for subsequent supply to EU consumers.

The feasibility study calls for starting construction of the 99.3-kilometer pipeline in 2017.

The interconnection will initially have capacity for 5 bcm a year, rising to 8 bcm a year in a potential second stage.