Vertical redistribution

Yulia Tymoshenko began to reshape the gas market of Ukraine

Prime Minister of Ukraine Yulia Tymoshenko began the redistribution of the domestic market for industrial gas consumption. Immediately after the New Year, the National Energy Regulatory Commission (NERC) decided to limit Ukrgazenergo’s license to supply gas to end consumers. As is known, until now, about 35 billion cubic meters needed by Ukrainian enterprises were provided annually by the Ukrgazenergo company. In addition, it sold about 20 billion cubic meters to Naftogaz of Ukraine for subsequent sale to heating and utility companies. Ukragazenergo is formally owned on a parity basis by the state concern Naftogaz of Ukraine and the Swiss trader RosUkrEnergo, but is actually controlled by a management team close to RUE co-owner Dmitry Firtash and ex-Minister of Fuel and Energy Yuriy Boyko (now a Verkhovna Rada deputy from the Party of Regions). .

Formally, NERC is not part of the executive branch (although its head is approved by the Cabinet of Ministers), however, the day before the license was limited, information appeared that Ms. Tymoshenko instructed the Minister of Fuel and Energy Yuriy Prodan, the head of the Naftogaz board Oleg Dubina and the head NERC Valery Kalchenko to consider the possibility of canceling the license of Ukrgazenergo for the supply of natural gas at an unregulated tariff.

Considering that formally the antimonopoly legislation of Ukraine prohibits affiliated structures from controlling more than 35% of the market for supplies to end consumers, it was easy to limit the powers of Ukrgazenergo. In recent years, no one paid much attention to this requirement, since due to rising prices for imported gas, the government strictly regulated the price level for consumers. In addition, the monopoly position of Ukrgazenergo in the market was programmed in the agreement between Gazprom, Naftogaz and RUE dated January 4, 2006. In accordance with it, the Swiss trader became the exclusive supplier of Central Asian gas to Ukraine, and Naftogaz committed to create a joint venture (Ukrgazenergo) with RUE, which would import all the gas and sell it on the market.

However, for the then government of Ukraine, headed by Viktor Yekhanurov, this was a forced decision, and officials tried to create opportunities for the presence of other traders in the market. Then they remembered the antimonopoly rule, and NERC issued a license to Ukrgazenergo to sell only 5 billion cubic meters of gas to end consumers. Thus, the subsidiary of Naftogaz and RUE had to sell the rest of the imported gas to traders whose licenses are issued by NERC. However, already in the summer of 2006, a day after Viktor Yanukovych was elected prime minister, the commission abolished this restriction. And last week, Mr. Kalchenko annulled this decision, after which the situation formally returned to two years ago.

True, since then Ukrgazenergo has gained a very strong foothold in the market and has entered into long-term contracts not only for the purchase of gas from RUE, but also for the supply to large end consumers, as well as for the transportation of these volumes through main gas pipelines and low-pressure networks.

It will not be easy for even Yulia Tymoshenko, who is experienced in the gas trading business, to destroy this system overnight. After all, forceful actions can lead to interruptions in gas supplies to consumers, and at the height of the heating season. However, for now Ukrgazenergo continues to supply gas at last year’s rate.

Gazprom and RUE do not comment on the situation, obviously awaiting developments. By the end of January, Naftogaz of Ukraine must pay Ukrgazenergo for gas supplies in December. Vremya Novostei's source in the Ministry of Fuel and Energy of Ukraine claims that the volumes have not yet been recorded in the acceptance certificates and, accordingly, there is a high probability of another debt scandal. After all, if Naftogaz (and its financial condition remains difficult and will obviously worsen in the coming year) does not pay, then Ukrgazenergo, in turn, will not pay off with RUE, which will ultimately have a debt to Gazprom. And then it is reasonable to expect traditional statements about restrictions on gas supplies to Ukraine.

Alexey GRIVACHS