You're reading: Ukrainian government proposes to permit exports of Ukrainian gas

The Ukrainian cabinet has proposed to the Ukrainian parliament to permit exports of Ukrainian natural gas, which will allow National JSC Naftogaz Ukrainy to fulfill an agreement with Poland's PGNiG on gas supplies to the country.

The draft law on amendments to the law on the basic functioning of the natural gas market regarding gas-extracting companies was registered in parliament on June 14, 2011.

In particular, it is proposed to amend the draft law with a requirement permitting Naftogaz Ukrainy and its subsidiaries to export natural gas extracted in Ukraine in volumes approved by the Ukrainian Energy and Coal Industry Ministry.

"The entity empowered by the Ukrainian cabinet to form a reserve of natural gas used for the needs of households and its subsidiaries have the right to export gas in the volume defined in the forecast annual stocks for gas distribution in Ukraine under a procedure set by the central executive power body for the realization of state policy in the oil and gas sector," reads the new draft.

According to an explanatory note to the draft, the present laws foresees sales of natural gas extracted by state-run companies in Ukraine to form stocks for the needs of households.

In addition, a contract signed between Naftogaz and Gazprom on January 19, 2009 bans the Ukrainian holding from re-exporting gas imported to the country under the said agreement.

The document says that Naftogaz Ukrainy does not have other sources of Asian gas, this has led to the stoppage of supplies of natural gas to Poland under a contract with PGNiG.

In addition, the government proposed to parliament to permit gas-extracting companies to use gas for their technological needs and the production of liquefied gas.

The note says that natural gas extraction by gas-extracting companies foresees the use of gas for their production needs and for preparations for gas, oil and gas condensate transportation.

The present law on the basic functioning of the natural gas market does not foresee the satisfaction of the above-mentioned needs of gas-extracting companies using gas extracted in Ukraine, as companies are to buy it at prices set by the National Energy Regulatory Commission (NERC), which are considerably higher than the prices at which the company has to sell gas to Naftogaz Ukrainy.

The government proposed to revise the "commodity natural gas" notion, which at present is all extracted gas, apart from actual losses and technological expenses of natural gas during its extraction, and preparation for transportation, which do not exceed the established volumes.

The draft law proposes to exclude volumes of gas extracted by companies and used for the needs of gas extractors from the notion: in particular, production needs during gas extraction, the preparation of gas, oil and gas condensate transportation (overhaul of wells, trucks, repair shops, administrative buildings), production of heat for heating facilities on the balance sheet of gas extractors, natural gas used at gas extracting companies to produce petroleum and gas products.