State-owned energy company Naftogaz will reportedly receive the loan for a program which will use coal-water fuel technology in domestic heat and power plants.
“On December 25, 2012, a loan agreement between Natfogaz and State Development Bank of China on financing the program of natural gas substitution with Ukrainian coal worth a total of $3.656 billion against the Ukrainian government’s guarantees was signed in the Ukrainian Cabinet of Ministers in the presence of Deputy Prime Minister Yuriy Boyko,” a Ukrainian government press statement said.
The effort is expected to save Ukraine $1.5 billion a year.
The move represents a continuing and concerted press in Ukrainian policy to reduce the country’s dependence on imported Russian gas.
Russian news agency RIA Novosti reported that Naftogaz imported Russian gas at $416 per 1000 cubic meters in the first quarter of this year, at around $425 in the second quarter, at $426 in the third quarter and will have to pay around $432 in the fourth quarter.
Ukraine, which has the world’s sixth largest coal reserves at some 34 billion economically minable tonnes, has historically struggled to advance its coal mining and power generation technologies. Rising public demand for electricity has prompted increased domestic and foreign investment in the country’s coal sector.
The government announced earlier this year it would invest up to $3.5 billion to construct five coal-to-gas plants in 2013.