(AP) — Ukraine landed a 150 million euro ($187 million) loan on Monday to modernize its section of the pipeline used to deliver natural gas from Russia to Europe. Ukrainian Prime Minister Asreniy Yatsenyuk said optimization of the country's gas pipelines would lower the cost of transporting the fuel by 20 percent. The loan is being provided to state-owned pipeline operator Ukrtransgaz by the EU's lender, the European Investment Bank.
Yatsenyuk says refurbishment of Ukraine's section of the Urengoy-Pomary-Uzhgorod pipeline will boost energy efficiency and reduce harmful emissions. Almost 120 kilometers of pipelines will be replaced and two compressor stations modernized under the project. The European Bank for Reconstruction and Development is expected to contribute another $200 million in loans for the same planned four-year reconstruction effort.
Yatsenyuk said he hopes a Ukrainian company will carry out the project, which he said could boost the economy. The pipeline system has the capacity to supply Europe with 142.5 billion cubic meters of gas annually. Russia has, for years, been pursuing pipeline projects intended to reduce its reliance on transit through the Ukraine. Commercial and political disputes have led to the suspension of gas supplies to Europe in the past.
One Moscow-backed project is South Stream, which would see gas transported from Russia through the Black Sea to Bulgaria and other European countries, bypassing Ukraine's pipelines. Yatsenyuk said recent electoral wins for EU parties in Bulgaria and Moldova, which held its parliamentary vote Sunday, could signal a downturn in the fortunes of South Stream.
"I hope Ukraine will not be bypassed by South Stream," he said Monday. "South Stream is a Russian political project." Instead, he urged more European and U.S. investment in the Ukrainian gas transit system.