You're reading: Ukraine to reduce Russian gas purchases to 27 billion cubic meters in 2012

Moscow, August 31 (Interfax) – Ukraine's Naftogaz has ordered 27 billion cubic meters of natural gas from Russia's Gazprom in 2012, a Ukrainian government source told Interfax.

"Ukraine has filed an official request to reduce purchases next year to 27 bcm," the source said.

He said the request was made by the deadline stipulated by contractual obligations.

The source also said a Ukrainian delegation, led by Naftogaz chief Yevhen Bakulin, was holding a latest round of gas talks in Moscow on Wednesday.

Over the next five years, Ukraine will manage to produce about 27 billion cubic meters of natural gas per year and purchase about 12 billion cubic meters of gas from Russia, Ukrainian Energy and Coal Industry Minister Yuriy Boiko said on August 22.

"We’re planning to increase our own production from 20 billion [cubic meters] to 27 billion cubic meters in five years, and taking into account a program for energy saving and the replacement of gas with coal, we are planning to buy 12 billion cubic meters of Russian gas in five years," he said.

Boiko said he was confident that in 2012, the country would manage to reduce natural gas consumption by 10 billion cubic meters.

Domestic gas consumption in the country grew by 11.2% last year, to 57.7 billion cubic meters. The country increased natural gas imports by 35.7%, to 36.5 billion cubic meters, or 17.7% to $9.39 billion in terms of price.

Ukraine bought three-quarters of its planned 2011 gas in H1 2011 in anticipation that the contract price would rise. The supplies came to 28.5 bcm-28.8 bcm, in the half.

Under the gas contract between Russia’s Gazprom and Naftogaz Ukrainy that was signed in January 2009, Naftogaz agreed to buy 52 bcm a year beginning in 2010. It can import less, but under the contract’s take-or-pay provision, Ukraine must pay for a minimum of 80% of that volume, regardless of the actual amount taken.

The contract provides for the basic volume to be amended down to 41.6 bcm, but the change must be agreed before July 1 of the preceding year. The change would reduce the take-or-pay threshold to 33.3 bcm.

The companies signed a supplement to the contract in April 21, 2010 under which Ukraine receives a discount reflecting a reduced export duty on the gas exported to Ukraine.

The export duty discount, which is in effect through 2019, equals $100 per 1,000 cubic meters but not more than 30% of the contract price, and applies to the first 30 bcm of Russian gas imports in 2010 and to the first 40 bcm in subsequent years. Volumes above that amount will be subject to the 30% export duty on gas.

The discount in the gas price for Ukraine will be reflected in the rental payment for maintaining Russia’s Black Sea Fleet in Sevastopol.