Russia outlines conditions for new Ukrainian gas transit deal

LONDON (ICIS)–Russia’s Gazprom has outlined three conditions for the conclusion of a long-term transit contract with Ukraine, once the current agreement expires at the end of the year.

In discussions on Friday with Russian prime minister Dmitry Medvedev, the CEO of Gazprom Alexey Miller said Ukraine and Russia had to completely resolve outstanding legal issues before a transit deal was signed.

Naftogaz is currently spearheading a $2.6bn claim (excluding interest) in an arbitration awarded in February 2018 by the Stockholm arbitration tribunal for Russian transit under-deliveries. It also has an $11bn claim in an ongoing lawsuit that would compensate Ukraine in case it loses the transit from 1 January 2020.

A second condition outlined by Miller was for Ukraine to clarify its position regarding the off-take of Russian gas by domestic customers.

“It should be understood that our supplies will, of course, be much cheaper than reverse supplies from western Europe,” Miller said, noting that Russian gas to Ukraine could be on average 20% less expensive.

In a statement posted on Facebook, Yuriy Vitrenko, executive director of Naftogaz Ukraine, conceded that Russian gas to Ukraine may be 20% cheaper, but added that Gazprom had to comply with EU regulations and not abuse its position if entering the market.

“In particular, Gazprom must guarantee it would not refuse European companies from moving gas transmission points to the Ukraine-Russian border,” he said.

Vitrenko added Gazprom should also allow other Russian or Central Asian companies to transit gas via Russia and sell it to Ukraine.”

Thirdly, Miller pointed out that since Ukraine had opted to adopt EU regulations for its gas market, it should ensure that the unbundling and certification of the new transmission system operator would be completed by 1 January 2020.

On Thursday, the energy committee in the Ukrainian parliament approved a series of amendments to ensure the unbundling of the transmission operations from Naftogaz from 1 January 2020.

In a statement to the press, Naftogaz said the Energy Community, the EU institutions working with Ukraine to implement EU free market rules, confirmed that the draft law complied with the requirements of the EU’s third energy package and recommended its prompt adoption by the Verkhovna Rada.

The draft law stipulates that the newly established gas grid operator of Ukraine remains fully owned by the state. At the same time, the powers of the regulator NERC are expanded to ensure the control and monitoring of the independence of the new gas transmission system operator.