The Ukraine’s national oil and gas company NaftoGaz has won a US$300mn loan from two banks to finance the reconstruction of the country’s gas transportation system.

The European Bank for Reconstruction and Development (EBRD) and the European Investment Bank will invest US$154mn each in the first part of the upgrade – the reconstruction of the Urengoi-Pomary-Uzhgorod main gas pipeline.

The balance of the estimated US$500mn total cost of the first phase will be provided by NaftoGaz. The financing has a 15-year sovereign guarantee from the Ukrainian government.

EBRD’s country director for the Ukraine, André Küüsvek says the bank hopes to sign the project later this year.

“The further reconstruction of the country’s gas transportation system could also be backed by the EBRD, as long as the necessary sector reforms and restructuring of NaftoGaz take place,” he adds.

Ukraine’s prime minister, Mykola Azarov comments: “We hope that Russia will also be interested in modernising the pipeline, now that Ukraine has begun to implement the project with its European partners.”

Ukraine hopes to attract more than US$5bn within seven years to completely overhaul its gas transportation infrastructure. It includes more than 37,000kms of pipelines, which carry 140 billion cubic metres of the gas supplied annually to Europe.