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Ukraine agrees to Russian gas deal



By Upstream staff 

Ukraine has signed off on a deal providing it with some of the cheapest supplies of imported natural gas in the former Soviet Union, ending what had been a bitter feud with Moscow over prices.

Under the deal, Ukraine will receive 34 billion cubic metres of Russian and Central Asian gas this year at $95 per 1000 cubic metres, state-controlled Naftohaz Ukrainy said - a nearly twofold increase for Ukraine but far less than the $230 Mcm it would pay if it was getting only Russian gas.

The deal also stipulates that Ukraine will receive up to 60 Bcm of gas annually at the same price through the end of 2010, Naftogaz spokesman Eduard Zaniuk said.

"All the documents were signed today, the talks are officially over," Zaniuk told Bloomberg after three days of tense talks.

The agreement appears to represent a major victory for Ukraine, which initially had been promised the $95 Mcm price only for the first six months of this year. Naftohaz insisted that it did not surrender control over any of the country's lucrative pipelines, which pump Russian gas onto Europe, to cement the deal.

The deal came nearly a month after Russia and Ukraine reached a framework agreement to settle a bitter price dispute that caused a temporary drop in supplies to Europe when Russia turned off the taps to Ukraine, sparking concerns about energy security across the continent.

At the crux of the 4 January agreement was a plan to create the new venture, co-owned by Ukraine's Naftohaz and the intermediary RosUkrEnergo, to supply gas to Ukrainian industrial consumers.

The proposal sparked criticism in Ukraine over the involvement of RosUkrEnergo, a shadowy company about which little was known. RosUkrEnergo is owned 50-50 by Gazprom and a group of secret investors.

But Ukraine's government gave its approval to the plan on Tuesday, paving the way for yesterday's signing. The new venture, called Rosukrenergo, will supply Ukraine's industrial consumers with gas together with Naftohaz. Naftohaz retains the right to supply residential consumers.

Ukraine currently uses 80 Bcm of gas a year, and is able to provide only about 20 Bcm of this itself. This year, it is making up the difference with a separate contract with Turkmenistan, but that contract expires at the end of 2006. Naftogaz and RosUkrEnergo officials refused to answer journalists' questions after the short briefing.

Meanwhile, Bulgaria's gas deal with Gazprom will not be reviewed for now, but talks will continue and a change cannot be completely ruled out, Bulgaria's Energy Minister said last night.

Rumen Ovcharov admitted on his return from talks in Moscow that in current arrangements "there is an apparent discrepancy between market prices and the prices at which we are getting a share of our gas supplies".


Friday, 03 February, 2006, 11:56 GMT  | last updated: Friday, 03 February, 2006, 11:56 GMT

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