Ukraine has secured a 150 million euro ($187 million) loan to modernize its section of the natural gas pipeline used to deliver gas from Russia to Europe.

Ukrainian Prime Minister Asreniy Yatsenyuk said Tuesday that 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 under the project, which is also to be co-funded by the European Bank for Reconstruction and Development.

The pipeline system has the capacity to supply Europe with 142.5 billion cubic meters of gas annually.