Ukraine Naftogaz debt to GTSOU could force gas TSO into insolvency, market sources

Aura Sabadus


LONDON (ICIS)–The Ukrainian gas incumbent Naftogaz has come under fire for forcing the gas grid operator GTSOU into major debt, jeopardising its independence and financial stability.

Several market sources told ICIS that the Naftogaz Group has an outstanding gross debt to GTSOU of almost Ukraine hryvnia (UAH) 23bn (€573m).

The sources worry that Naftogaz has been using the gas grid operator as a ‘cash cow’ with negative consequences for the independence of GTSOU.

The operator was established after the unbundling of transmission operations from Naftogaz in 2020.

If the gas incumbent fails to return at least part of the cash, the TSO faces insolvency in March when it is expected to pay its annual taxes to the state budget, sources say.


ICIS understands that the debt owed to GTSOU entails a gross payment of UAH19.8bn as the TSO was forced to deliver gas to customers for whom Naftogaz has a responsibility as a supplier of last resort.

Conversely, GTSOU itself owes UAH7bn to Naftogaz Trading, a subsidiary of the Naftogaz Group, sources said.

Naftogaz Trading had been selected through an open procurement tender as balancing partner for GTSOU and was expected to deliver volumes to the operator to balance the system.

On 1 November 2021, the regulator, NERC, assigned the duty of supplier of last resort to LLC Naftogaz of Ukraine, another subsidiary of the Naftogaz Group.

This entity was expected to supply gas to distribution system operators (DSOs) including technological gas for balancing the system but market sources say that it did not do so.

At the same time, GTSOU stopped payments to Naftogaz Trading for supplying balancing gas, while expecting LLC Naftogaz of Ukraine to fulfil this responsibility as supplier of last resort.

As LLC Naftogaz of Ukraine did not deliver technological gas to DSOs, GTSOU was forced to step in to balance the system, supplying around 700 million cubic meters (mcm) of gas.

The supplies covered the period 1 November 2021 – 28 February 2022 as well as sporadic periods in April and May 2022.

GTSOU sued Naftogaz in the second half of 2022, expecting to recover the debt. The court case is ongoing.


Furthermore, Naftogaz forced GTSOU to make advance compensation payments in a UAH47bn settlement deal following the unbundling of transmission operations.

This money was supposed to be paid over a five-year period and was linked to the fact that prior to the unbundling, the previous transmission operator, Ukrtransgaz, a subsidiary of Naftogaz, did not receive full payments for the transit of Russian gas from Gazprom.

This meant that when the transmission operations were divested from Naftogaz in 2020, the new TSO, GTSOU, agreed to pay off the debt until the end of 2024.

However, in 2021, Naftogaz, which was itself struggling with debt, forced GTSOU to make advance payments. This means that up until January 2023, the transmission system operator had already paid UAH44.7bn, several market sources told ICIS.

They also say that GTSOU has overpaid by UAH16bn.


The same market sources also note that under the new transit deal with Gazprom, Naftogaz, as the organiser of the transit, should be paying GTSOU for booked capacity to flow Russian gas to Europe.

However, with Gazprom now transiting less gas than the contracted 109.6mcm/day that it should ship via Ukraine, it also pays only 70% of the total fee. Market sources say Naftogaz is paying less to GTSOU but argue that the incumbent should be paying 30% less only on the gas that enters Ukraine from Russia but not on the gas exiting Ukraine for European countries.

The same sources say that, since May 2022 when Russia started to reduce gas transit volumes via Ukraine, Naftogaz has paid UAH3bn less than it should.

This means that in all, the Naftogaz Group has a gross debt of close to UAH23bn to GTSOU.

If calculated on a net basis, subtracting the UAH7bn debt owed by GTSOU to the Naftogaz Group, the total sum would amount to UAH16bn.

Naftogaz, GTSOU and NERC did not reply to questions from ICIS.


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