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Boiko: Naftogaz to buy little less than 27 bcm of natural gas in 2012

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Sept. 17, 2012, 6:52 p.m. | Business — by Interfax-Ukraine

National NJSC Naftogaz Ukrainy put in a bid for the purchase of 27 billion cubic meters (bcm) of natural gas in 2012.
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Yalta – National NJSC Naftogaz Ukrainy put in a bid for the purchase of 27 billion cubic meters (bcm) of natural gas in 2012, and, according to recent assessments, will buy a little less than that amount, according to Energy and Coal Industry Minister Yuriy Boiko.

"We've followed all the necessary procedures under the contract to supply an official bid [to buy natural gas]," he said on the sidelines of the 9th Yalta Annual Meeting.

According to the minister, the Russian side's response to that bid was silence; therefore Ukraine is working according to the amounts sealed in the bid.

In keeping with the recent prospectus of the issue of Ukrainian eurobonds, Naftogaz on February 7, 2012, sent Gazprom an addendum to the agreement on the supply of natural gas to Ukraine, which foresees a decrease in supplies in 2012 to 27 bcm. As was mentioned in the document, the decrease in gas imports could be partly compensated for using gas to be pumped from underground storage facilities.

In June 2012, this amount of gas imports was stipulated in the projected balance of gas supply and demand for 2012. It also foresees the import of 8.124 bcm of gas by Dmytro Firtash's Ostchem Holding Limited (Cyprus).

The balance also envisages that this year 49.8 bcm will be sold to Ukrainian consumers, 4.4 bcm will be used for production and technical needs (to ensure transit supplies), 13.14 bcm will be pumped into the underground storage facilities.

Ukraine in January-July 2012 reduced natural gas imports by 39%, or by 12 bcm, to 18.7 bcm, while consumption slid by 7.3%, to 33 bcm.

Boiko said last week that Naftogaz had already placed a bid for a reduction in Russian gas purchases in 2013 to 24.5 bcm, whereas Ukrainian Prime Minister Mykola Azarov said in Yalta on Sept. 14, 2012, that Ukraine would halve gas consumption in 2011-2012.

Answering a question from Interfax-Ukraine regarding the reduction in purchases of Russian gas by Ukraine, Russian Deputy Prime Minister Arkady Dvorkovich said that the issue had to be addressed to Gazprom, which is a signatory to the gas contract.

"This is a question for the company," he said.

"It's unrealistic to reduce gas consumption as drastically as they [the Ukrainian government] say," said Russian Ambassador to Ukraine Mikhail Zurabov, who was also present at the interview.

"In keeping with the gas accords between the Russian and Ukrainian gas giants, which were concluded in January 2009, Naftogaz from 2010 planned to buy 52 bcm of natural gas. In case of the purchase of less than 80% of that amount, Naftogaz should anyway pay for 80% of the contracted gas on the take-or-pay terms.

The gas accords foresee a reduction in gas purchases by not more than 20% upon agreement by the sides (i.e. to 41.6 billion cubic meters), but such an agreement should be concluded by July 1 of the year that precedes the year of the purchase. Based on the take-or-pay terms, the minimum amount of gas purchases in that case will be 33.3 bcm.

In 2011, Naftogaz's contractual gas purchase obligations for 2011 were reduced to 41.6 bcm, i.e. the take-or-pay obligations had 33.3 bcm of natural gas.

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