You're reading: Gazprom, Ukraine discuss gas deliveries under current contract

Moscow, (Interfax) - Gazprom CEO Alexei Miller has discussed gas cooperation at a meeting with Ukrainian Energy and Coal Industry Minister Yuriy Boiko.

"Specifically, the discussion concerned gas deliveries to Ukraine under the existing long-term contract," Gazprom said in a press release.

Since the beginning of July, Naftogaz Ukrainy has sharply reduced the amount of Russian gas it has taken delivery of, compared with June, according to data from the Fuel and Energy Central Dispatch Service.

Ukraine took delivery of 28.969 billion cubic meters (bcm) of Russian gas through July 3, which is 13.826 bcm or 91% more than in the same period last year.

Ukraine plans to import 40 bcm of gas from Russia this year.

Prime Minister Mykola Azarov said previously that Ukraine would reduce imports in the second half of 2011 compared with the first half in anticipation of rising prices in the last two quarters of the year. Ukraine paid about $264 per 1,000 cubic meters of Russian gas in the first quarter, $297 in the second, $350 in the third quarter, and this might reach $400 in the fourth. The price is tied to the price of a basket of oil products with a nine-month lag.

Naftogaz Ukrainy has been trying to negotiate changes in the contract that would provide a discount based on the volume purchased, as well as seasonal discounts.

At a recent meeting with Boiko, Miller said a reduction would only be possible if Gazprom and Naftogaz Ukrainy merge.

Under the gas contract between 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.