Russia sees no Ukraine gas formula amendments until 2019 year-end

Russia sees no Ukraine gas formula amendments until 2019 year-end
By bne IntelliNews June 9, 2016

Russia is not going to amend  the gas supply contract with Ukraine until the 2019 year-end, Russia’s Energy Minister Alexander Novak told journalists on June 8, just after Ukraine formally asked Russia to resume gas delieveries ahead of the heating season. 

"We always maintain the position that no amendments can be made in the contract until 2019 year-end. In particular, referring to gas supplies to Ukraine, current prices of Ukraine effective even in the second quarter are much more comfortable than spot and European gas hubs prices," TASS news agency quoted Novak as saying.

The statement followed Kyiv's official request to resume delivering of Russian natural gas for the first time since November 2015. During the 2015-2016 winter period, Ukraine did not purchase natural gas from Russia and instead imported gas from Russian clients in Europe, such as Slovakia and Poland, by reverse flow, and with a mark-up in price.

In October 2015, Kyiv and Moscow signed an EU-brokered deal ensuring supplies continue to March 2016, whereby Russia lowered the price it charges to other countries to around $230 per 1,000 cubic metres. In April, the Ukrainian authorities said that Ukraine is seeking to resume gas talks with Russian under the European Commission's mediation.

Novak added that the estimated price for the second quarter of 2016 is $177 per 1,000 cubic metres. "The price is not yet available for the third quarter; it will be calculated," the minister added. "The price in the second quarter established to date is absolutely comfortable without discounts and fully corresponds to the market situation. The main issue is whether Naftogaz has funds."

Meanwhile, Naftogaz expects that the price of imported gas in the third quarter will be less than $200 per 1,000 cubic meters, the company's CEO Andriy Kobolev said in Kyiv on June 8, adding that in the second quarter the company bought as little gas as possible, expecting lower prices on the international markets in July-September.

Kobolev underlined that the letter to Gazprom on the possible purchase of gas in the next two quarters is linked to the necessity of comparing the price of the Russian company with prices of European traders.

"We as we usually did proposed, including to Gazprom, to present their price offer and sign a supplementary agreement to the 2009 contract," Interfax news agency quoted him as saying. "This was done to make sure that we buy gas at the lowest price."