Future of Ukrainian gas discount price unclear - Medvedev

25 February 2014 16:29 Source:ICIS

Temporary gas price discounts given by Russian to Ukraine last December will be honoured but it is not clear what will happen after expiry at the end of March, Russian prime minister Dmitri Medvedev has said in Sochi.

“What will happen with gas cooperation after expiry of the duration of the [gas price] discounts is a separate question” he said, adding this needed to be discussed with the management of Ukrainian companies and the Ukrainian government “whenever that finally emerges”.

The gas agreements referred to by Medvedev were signed in December between Russia and Ukraine and included a substantial discount on the Russian gas price to Ukrainian oil and gas incumbent Naftogaz Ukrainy. The price went down to $268.50 (€196)/thousand cubic metres (kcm) in Q1 2014 from an average $400/kcm over 2013 ( see ESGM 17 December 2013 ).

The gas agreement formed part of a larger package – including a $15bn credit to Ukraine – following Ukraine’s stepping away from an association agreement with the EU in November. The gas price is reviewed quarterly, according to the agreement.

Medvedev said on Monday there needed to be further consultation with the Ukrainian partners prior to any extension of the agreements.

Regarding the $15bn credit Medvedev said “we are ready to discuss all subjects with our Ukrainian partners, but we need to know with whom we should be conducting such discussions.”

The credit was offered to Ukraine by Russia at the end of 2013. The first $3bn tranche has already been given, the second $2bn was supposed to have been given in February but has been put on ice. One condition named by Russia for the issuing of the second tranche was that Ukraine would settle its gas debt to Russia, at least in part.

The credit came in the form of Eurobonds issued by the Ukrainian government and bought by Gazprom.

Gas transit to Europe and supply to Ukrainian customers continued normally, according to information published on the Ukrainian energy ministry website on Monday.

There have been reports in the local media that Ukraine has now decided to reduce Russian gas imports and maximise offtake from Ukrainian storage in order to reduce the level of its gas debt to Gazprom, but neither Ukrainian gas incumbent Naftogaz nor Russian Gazprom had replied to ICIS questions on this by press time.

Gazprom earlier told ICIS that Russian gas supply to Naftogaz in January reached 2.4 billion cubic metres (bcm) at a price of $658m. These were preliminary figures.

Volumes in Ukrainian storage were 11.5bcm as of 20 February, according to a statement by energy minister Eduard Stavytsky reported in the local media. Elizabeth Stonor

By Elizabeth Stonor