You're reading: Parliament allows Naftogaz to buy gas without holding tenders

The Verkhovna Rada, Ukraine's parliament, has allowed National JSC Naftogaz Ukrainy to buy gas without holding tenders.

A total of 272 of the 394 MPs registered in the sitting hall voted for amendments to the law on state procurements on April 12.

This means the company has the rights to acquire natural gas, transport services for it (including its transportation, insuring it, loading and unloading it, and inspecting it for quantity and quality), distribution, delivery, and storage without tender.

Naftogaz Ukrainy will also be able to gain access without tender to the services of financial instruments, operations with derivatives and risk-management, financial services, exchange services, auctions, electronic trading systems, and other services used in international trade and financial practice in the purchase and sale of natural gas.

The country’s Energy and Coal Industry Ministry said that this ability will make it possible to cut the cost of gas for Ukrainian users.

The operation of the spot market plays a key role in pricing on regional gas markets in Europe and promotes competition on the entire European market. The spot market provides access to many gas suppliers, including producers and others, and makes available a pricing alternative to long-term contracts.

In line with Gazprom’s plans and announcements regarding a substantial reduction in the transit of Russian gas via Ukraine’s gas-transport system to Europe, the possibility is being looked at of using that capacity in a reverse direction.

Around the middle of last month, Naftogaz Ukrainy chief Yevhen Bakulin announced negotiations over the purchase of up to 10 billion cubic meters (bcm) of natural gas in Europe. And, Energy and Coal Industry Minister Yuriy Boiko spoke of Ukraine’s intentions to start buying gas on spot markets in Europe this summer.

Prime Minister Mykola Azarov said that if talks with Russia aimed at getting the price of gas down prove fruitless, Ukraine could buy Russian gas from the German company RWE.

Market experts say the country would be able to buy up to 20 bcm per year on European spot markets and import the gas through Slovakia starting in 2015 or 2016.