Ukraine is working to become an energy hub, producing its own gas, developing storage and importing from both the European Union and Russia, Ukraine's energy minister said in Brussels.

The European Union is pressing for agreements to be sealed with Ukraine by the end of this year as both parties seek to dilute Russia's dominance as a gas supplier.

But Kyiv is torn between EU cooperation and Russia's promise to cut its gas bills in return for control of its pipelines.

At the end of April, Ukraine's government asked parliament to lift a ban on the privatisation of state energy firm Naftogaz, which includes pipelines that pump Russian gas to Europe. That could allow Kyiv to sell or lease them to Russia's gas export monopoly Gazprom.

Ukraine's Energy Minister Eduard Stavytsky and EU Energy Commissioner Günther Oettinger raised the possibility of a three-way relationship at talks in Brussels on Friday (3 May).

"Ukraine is really trying to consider its geopolitical situation and to establish a gas hub, so we will be able to do spot purchases in central Europe," Stavytsky told reporters.

Oettinger said he believed EU firms were willing to buy into Ukraine infrastructure. He did not name potential investors, but energy firms were at the closed-door talks, including ExxonMobil and Royal Dutch Shell. None was immediately available to comment.

Millions needed to upgrade infrastructure

Stavytsky said €420 million was needed to modernise Ukraine's infrastructure, of which Naftogaz could provide €183 million, while the rest would come from loans.

Since late last year, technology allowing pipeline flows to be reversed has allowed Ukraine to import some gas from EU nations, including Hungary and from Germany via Poland. In addition, Slovakia is seeking to develop reverse flow technology, with a test expected this month, Oettinger said.

As the European Commission seeks to expand its internal energy market, it has also been working to develop Ukraine's extensive gas storage, which could ease any supply shortages.

Ukraine already has storage of 31 billion cubic metres (bcm) and Stavytsky said it was seeking to increase it to 50 bcm, compared with 95 bcm for the EU as a whole.

In the past, gas flows to the EU have been disrupted because of Ukraine's quarrels with Russia over how much it has to pay for its supplies.