Russia raises 2008 Ukraine gas price by 38%

05 December 2007 13:25  [Source: ICIS news]

LONDON (ICIS news)--Russian energy giant Gazprom will increase its price for natural gas supplied to Ukraine by 38% in 2008, a fertilizer industry source said on Wednesday.

 

An agreement was reached to raise the price to $179.5 per thousand cubic metres (tcm) DAF (delivered at frontier) Ukrainian border, from $130/tcm for 2007. The previous year it was $95/tcm.

 

Based on the new price, the cost of ammonia production was estimated to be equivalent to $265/tonne FOB (free on board) Yuzhny (prior to VAT, which is reimbursable) for the most efficient producer in Ukraine, OPZ, and around $290/tonne for Gorlovka.

 

Others will face a production cost above $315/tonne FOB. 

 

Cost increase has already led to a reduction in Ukrainian ammonia exports this year, with exports expected to be around 600,000 tonnes lower by the end of 2007.

 

This was partly because of extended turnarounds taken during the summer, however.

 

The new gas price will raise the “break even” urea export price for most Ukrainian suppliers to over $200/tonne FOB Yuzhny.

By: Antonella Harrison
+44 20 8652 3214

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