Ukraine’s Cabinet of Ministers has hatched a surprise reshuffle of top management at state gas giant Naftohaz Ukrainy following a meeting in Kiev late on Wednesday.
The Cabinet has temporarily dismissed the independent members of Naftohaz’ advisory board for two days to assume operational control over the company and ordered the firing of chairman Andrey Kobolev.
Gain valuable insight into the global oil and gas industry's energy transition from ACCELERATE, the free weekly newsletter from Upstream and Recharge. Sign up here today.
Kobolev’s replacement is Yuri Vitrenko, an acting Energy Minister. Kobolev was appointed to reform Naftohaz and the country’s gas market in 2014 and quickly brought his former colleague Vitrenko on board.
However, Vitrenko left the company in July last year following alleged disagreements with Kobolev on the continuation of market reform in the country’s gas sector.
Stability concerns
The apparent lack of consensus at the top of Naftohaz may undermine the Ukrainian government's efforts to secure billions of dollars of new funding from the International Monetary Fund, which has said the reform to widen market-based gas pricing mechanisms should continue despite potential resultant price shocks.
Additionally, Naftohaz remains a party in the five-year gas transit agreement with Russian gas giant Gazprom, with industry analysts in Kiev warning that any new instability at Naftohaz will be picked up by the Kremlin as reason to halt Russian gas flows to Europe across Ukraine.
Naftohaz said in a statement that the decision of the Cabinet of Ministers is “legal manipulation” as, according to the law, only an independent advisory board is allowed appoint or dismiss the head of the company.
Legislation ignored
The country’s legislation had earlier been amended to prevent any direct involvement of governmental officials in operations of state-owned companies to avoid potential conflict of interests, with independent advisory boards introduced to consider and rubberstamp governmental nominations and directives.
Meanwhile, Kobolev wrote on his personal social network page that he only learned about his dismissal from “media reports”.
The Cabinet argued that it had to urgently terminate Kobolev's work contract after Naftohaz reported a net loss of 19 billion hryvna ($680 million) for the last year as against a net profit of 2.6 billion hryvna in 2019.
However, Naftohaz said that the loss had come as the company set aside a reserve of over 23 billion hryvna to reflect delayed payments from gas traders and customers.
