Gazprom offers discount gas to Ukraine, Naftogaz rejects

Author: Aura Sabadus

2019/06/07

LONDON (ICIS)--On 7 June Russian natural gas producer Gazprom told ICIS it had offered to start direct supplies to Ukraine at a 25% discount, but that Naftogaz rejected the offer.

Naftogaz, Ukraine’s state-owned supplier, said it was not clear what price was to be reduced by 25% and under what conditions.

Naftogaz said: “So far, Gazprom’s offer is less appealing than the prices available to Ukraine in the European market.

“We invite the Russian side to tripartite talks. We understand that an agreement on the continuation of transit through Ukraine is more important for Gazprom than the resumption of direct supplies.”

Ukrainian imports

Ukraine’s import prices have been falling in recent weeks in line with bearish European markets.

The ICIS Ukraine front month border price (UA-Border) has fallen by 16% since the beginning of May and was assessed at €16.23/MWh on 6 June.

Naftogaz stopped off-taking gas from Gazprom in 2015 following a dispute with over the terms of its supply and transit to Europe.

Following an award by the Stockholm arbitration tribunal in December 2017, Gazprom was expected to resume supplies on 1 March 2018.

Gazprom refused to deliver the volumes as expected after disagreeing with a second award in the transit arbitration with Naftogaz at the end of February 2018.

Under the award, Gazprom is required to make a net payment of $2.56bn to the Ukrainian supplier for under delivered volumes.

Naftogaz, Gazprom and the EU are expected to start talks later this year on key issues, including;

  • Transit to Europe after the current agreement expires in 2019
  • Re-routing transit through the Nord Stream 2 pipeline from 2020
  • The supply of Russian gas to Ukraine