Firtash company to upgrade Ukrainian section of Urengoi-Pomary-Uzhgorod pipeline

Ukrtransgaz, a subsidiary of Ukrainian national oil and gas company Naftogaz Ukrainy, has named Zangas NGS (Mykolaiv) the winner of a tender to upgrade and repair a 27.6 km Ukrainian section of the Urengoi-Pomary-Uzhgorod trunk gas pipeline.

Ukrtransgaz reported on the government procurements Web site that the bid from Zangas NGS, which is part of Dmytro Firtash's DF Group, of UAH 235.14 million (with VAT around $29.42 million at the current exchange rate), was accepted on December 13. The companies have until January 12 2013 to complete the deal.

Work to upgrade the linear part of the pipeline at section 3,851.3-3,878.9 (Nemyriv, Illintsi and Lypovets districts in Vinnytsia region) should be completed by August 2014 and includes a complete replacement of pipes from the Illintsi connection junction to the line tap at 3,878.9 km.

The tender documents state that Ukrtransgaz should pay 30% in advance for the purchase of equipment, materials and for construction and installation work.

Naftogazbud (Lviv) was another bidder in the tender and bid UAH 236.15 million.

The priority gas transport system upgrade projects in Ukraine are the western transit corridor (Soyuz, Urengoi-Pomary-Uzhgorod and Progress pipelines) and the southern corridor (Yelets-Kremenchuk-Kryvy Rih and Ananyev-Tiraspol-Izmail pipelines).

Ukraine announced in the summer of 2011 that it was launching a project to modernize the country's gas transport system that, according to preliminary estimates, is to cost $5.3 billion over five to seven years. Investment in upgrading the trunk pipelines will enable Ukraine to cut costs by improving the system efficiency.

The first phase of reconstruction will be the modernization of the Urengoi-Pomary-Uzhgorod pipeline, which envisages reconstruction of the Ukrainian section and should take three years. Investment in the first phase is estimated at $538.87 million. Ukraine plans to raise 308 million ($154 million each) from the EBRD and the EIB and Naftogaz Ukrainy is to put up another $208.87 million of its own funds.

The length of the Ukrainian section of the pipeline is 1,160 km and pipe diameter is 1,420 mm.

Transit of natural gas via Ukraine to Europe and the CIS grew 5.7% year-on-year in 2011 to 104.2 billion cubic meters.