Gas deal needs revision
20 February 2008
Published in
Inform
issue #63
See the full issue here.
Prime Minister Yulia Tymoshenko is to reopen talks aimed at brokering a direct relationship between Naftohaz Ukrainy, Ukraine’s state-run gas company and Gazprom, its Russian counterpart. Last week’s accord was applauded for its proposed removal of RosUkrEnergo, the controversial gas trader that supplies a mix of Russian and Central Asian gas to Ukraine. However, the suggestion that a new joint venture between Naftohaz and Gazprom be established was rejected by the government and will be the subject of further talks.
Delighted by the news to remove RosUkrEnergo, Prime Minister Yulia Tymoshenko last week described it as “a great victory for the democratic team."
See the full issue here.
Prime Minister Yulia Tymoshenko is to reopen talks aimed at brokering a direct relationship between Naftohaz Ukrainy, Ukraine’s state-run gas company and Gazprom, its Russian counterpart. Last week’s accord was applauded for its proposed removal of RosUkrEnergo, the controversial gas trader that supplies a mix of Russian and Central Asian gas to Ukraine. However, the suggestion that a new joint venture between Naftohaz and Gazprom be established was rejected by the government and will be the subject of further talks.
Delighted by the news to remove RosUkrEnergo, Prime Minister Yulia Tymoshenko last week described it as “a great victory for the democratic team."
Yet today’s concern is over the proposed replacement
of one joint venture with another. The government is
maintaining its desire for a direct contractual
relationship between the two state-owned gas
companies and the whole issue will be tabled for
discussion during Ms Tymoshenko’s visit to Moscow
this week.
Regardless of what is decided, for the time being, RosUkrEnergo will continue to supply gas until a replacement structure is in place.
A significant aspect of the accord agreed last week concerns the removal of UkrGazEnergo. It was proposed that a 50-50 joint venture between Naftohaz and Gazprom be established to handle domestic sales inside Ukraine. This amounts to a significant coup for Gazprom which would gain partial control of the Ukrainian gas market – something it has long cherished.
"Distribution is the prize,” said Elena Herold, an analyst at PFC Energy.
Last Thursday the government decided to liquidate UkrGazEnergo as “the first step to impose order and create another scheme for gas deliveries in the domestic market.” However, according to Yuriy Prodan, the Minister of Fuel and Energy, such a liquidation "will take some time." Talks are now underway to define terms and mediate with the company.
Last week, the government also agreed to start paying off the $1 billion debt demanded by Gazprom. A repayment of $100 million was made on 14 February. In return the Russians backed off from threats to raise the price of gas beyond the $179.50 per thousand cubic metres agreed in 2007.
An agreement with Gazprom is tantalisingly close. Much will depend on Ms Tymoshenko’s visit to Moscow which hopefully will result in greater clarity and be cause for celebration.
Regardless of what is decided, for the time being, RosUkrEnergo will continue to supply gas until a replacement structure is in place.
A significant aspect of the accord agreed last week concerns the removal of UkrGazEnergo. It was proposed that a 50-50 joint venture between Naftohaz and Gazprom be established to handle domestic sales inside Ukraine. This amounts to a significant coup for Gazprom which would gain partial control of the Ukrainian gas market – something it has long cherished.
"Distribution is the prize,” said Elena Herold, an analyst at PFC Energy.
Last Thursday the government decided to liquidate UkrGazEnergo as “the first step to impose order and create another scheme for gas deliveries in the domestic market.” However, according to Yuriy Prodan, the Minister of Fuel and Energy, such a liquidation "will take some time." Talks are now underway to define terms and mediate with the company.
Last week, the government also agreed to start paying off the $1 billion debt demanded by Gazprom. A repayment of $100 million was made on 14 February. In return the Russians backed off from threats to raise the price of gas beyond the $179.50 per thousand cubic metres agreed in 2007.
An agreement with Gazprom is tantalisingly close. Much will depend on Ms Tymoshenko’s visit to Moscow which hopefully will result in greater clarity and be cause for celebration.