Europeans plan to create consortium and buy Ukrainian gas transit system

European companies are planning to create a consortium and buy the Ukrainian gas transportation system, Ivan Grachev, chairman of the Energy Committee in the State Duma (lower house of the Russian parliament), said on Thursday, April 3.
“Everyone understands that Ukraine has no money now. European partners are afraid that the ‘gas war’ scenario of 2009 might occur again. As far as I know, Europe is considering the possibility of creating a trilateral consortium to buy the Ukrainian gas transportation system from Naftogaz Ukrainy. The revenue will be used to resolve the gas issue,” the MP said.

He has met with EU officials and parliamentarians from Germany and Belgium many times over the past several months and will meet with his Dutch colleagues next Monday, April 7.
The Ukrainian gas transit system is estimated at 5.3 billion U.S. dollars. Ukraine will need 6-7 billion U.S. dollars to pump gas into its underground storage facilities and buy gas until the end of the year.
Naftogaz Ukrainy may import 1.7-2 billion cubic metres (bcm) of Russian gas in April, parliament-appointed Minister of Energy and Coal Industry Yuri Prodan said.

Prodan said the price of 485.5 U.S. dollars per 1,000 cubic metres of Russian gas was too high a price. “This is an exorbitantly high price and Russia should understand that there are no other such [price] analogues,” he told a news conference in Kiev.
The minister said it would be less costly for Ukraine to import gas from Europe.

Speaking about the price for the transit of Russian gas through Ukraine to Europe, Prodan said. “It’s subject to negotiation.”
He said Ukraine would like to go back to the agreement with Russia reached in late 2013, which allowed Kiev to buy Russian gas at a price of 268.5 U.S. dollars per 1,000 cubic metres and get a 15 billion U.S. dollar loan from Russia.

“We have to begin negotiations in order to go back to that price. This is probably the price that ensured stable work of our gas transportation system,” the minister said.
The agreement envisaged the disbursement of two billion U.S. dollars to Ukraine in 2014, which Kiev would automatically have used to pay the debt for Russian gas, which Prodan estimated at about two billion U.S. dollars.

Russia abolished the zero duty on gas for Ukraine on April 3, which will automatically raise the price of gas for Ukraine from April 2014 to 485 U.S. dollars per 1,000 cubic metres, an increase of more than 200 U.S. dollars from the price that was used until now.
In December 2013, Russian Gazprom and Naftogaz Ukrainy signed an addendum to the gas agreement in effect from January 19, 2009, under which the price of Russian natural gas for Ukraine was to be reduced by one-third to 268.5 U.S. dollars per 1,000 cubic metres from January 1, 2014, compared to 410 U.S. dollars per 1,000 cubic metres in the fourth quarter of 2013.
Moscow and Kiev also agreed that the discount would remain in effect as long as the key conditions were met, specifically timely payments for current supplies and repayment of debts.

At the end of the first quarter of 2014, Gazprom said it would have to raise the price of gas for Ukraine by more than 100 U.S. dollars to 385.5 U.S. dollars per 1,000 cubic metres because Ukraine had failed to pay the debt for the gas delivered in 2013 and had not made payments for current supplies.

In March, Russia supplied 1,956 million cubic metres of gas to Ukraine and “has not received a kopeck” for it so far. “The debt has increased and exceeded 2.2 billion U.S. dollars. The situation is not improving. It is actually getting worse,” Miller said.
The new rise in the price of gas by another 100 U.S. dollars to 485.5 U.S. dollars per 1,000 cubic metres announced on April 3 is a result of the abolition of the zero export duty on gas for Ukraine.