07.06.09

Gazprom Won't Cut Off Ukraine From Gas - Miller

Gazprom will not stop gas deliveries to Ukraine even if Neftegaz fails full and timely payments for this May, Gazprom CEO Alexei Miller said on Tuesday.

It is still unclear whether Neftegaz Ukrainy can repay gas deliveries of this May fully and on time, he noted after a Tuesday meeting with his Neftegaz counterpart Oleg Dubina at the Gazprom head office.

The payment is due through June 7, he remarked.

"Any disconnection of Ukraine .125from gas.375 is out of the question, as Gazprom has signed the ten-year contract. Even if the sides have to switch to prepaid gas supplies, Neftegaz will decide how much gas it needs. They will get as much gas as they pay for," Miller said.

Miller and Dubina met on Tuesday to discuss the fulfillment of long-term contracts on gas delivery and transit, Gazprom reports.

The interlocutors discussed "Ukrainian current gas payments and filling of Ukrainian underground gas storage facilities for the upcoming winter season's delivery and transit," the company said.

Ukrainian gas debts of 2008 and the lack of contract for 2009 caused a gas crisis and suspended gas transit to Europe this January.

The deliveries resumed on January 19 with the signing of long-term contracts in the attendance of the Russian and Ukrainian premiers. The sides agreed on the European principle of gas pricing for Ukraine and the transit charge of $1.7 per 1,000 cubic meters of gas carried per every 100 kilometers.

It was obvious even in January that Neftegaz would have to work hard in order to meet its commitments. Gazprom forgave the Ukrainian taking of insufficient amounts of gas and did not levy any fines. This spring Ukraine and Russia started to discuss a possible loan of $5 billion for funding gas storage in underground facilities, but the Brussels declaration of Ukraine and the European Union, which disregarded the opinion of Russia in the modernization of the Ukrainian gas pipelines, started a new period of cooling in the bilateral relations.

Although the two prime ministers are trying to resolve the problem, Ukrainian President Viktor Yushchenko demands that the Ukrainian government must immediately initiative a review of the gas contracts. Russian Ambassador to Ukraine Viktor Chernomyrdin said recently that the gas agreements might be reviewed only to the prejudice of Ukraine.

Russia said many times that it was ready to credit Ukrainian gas purchases on condition of the participation of European partners in that process.

Russian Energy Minister Sergei Shmatko said on Monday that Gazprom would switch to 100% prepaid deliveries in case of the Ukrainian failure to pay for gas supplied in May.

The gas contract provides the European pricing formula with the 0.8 coefficient for Ukraine. The price varies from one quarter to another. Starting from January 1, 2010, Gazprom will be selling gas to Ukraine at the market European price without any discounts.

Gazprom is extremely concerned about the storing of gas in Ukraine and does not rule out problems in gas transit to Europe. "Naturally, we are very concerned about this situation. We are trying to convey our concern to European colleagues," Gazprom spokesman Sergei Kupriyanov said on Monday.

"If the Ukrainian gas storage facilities are not filled in summer, it will be extremely difficult for our Ukrainian colleagues to fulfill their transit commitments," he said.

"The contracts signed this January stipulate regular payments for each month of gas supplies, no later than on the seventh of the next month. Some of the gas the Ukrainian company is buying from Gazprom must go to underground storages, and these amounts will be paid for later. We are thinking how to fill in this gap," he said.

"As far as we know, representatives of the Russian government maintain contact with the EU administration in order to elaborate a possible mechanism of joint investments in the solution of the Neftegaz financial problem," Kupriyanov said with the reference to Prime Minister Vladimir Putin's suggestion of forming an international credit pool for Ukraine and Russia's possible contribution of $10 billion.

As for the possibility of a larger discount for Ukraine, like it is in the case of Belarus, Kupriyanov said, "the amount of payments for transit is more significant than the discount."

"I must say that we show goodwill. We have fully paid for this year's transit, and we do not fine Ukraine for taking much less gas than it is stipulated by contracts," he said. "I must say that we meet our Ukrainian colleagues halfway."

"We found a legal solution to the gas dispute this January. The contracts spell out our relationship for the next decade. The only thing we need now is the Ukrainian strict compliance with the contracts," he said.

"We also want to tell our European partners that Ukraine must pump gas into the storages in order to ensure transit in winter. If that is not done, Neftegaz Ukrainy will be physically unable to meet its transit commitments," he said. "It seems we should help them do it together."

Ukraine must pay another $500 mln for gas in May - Kyiv

Ukraine currently owes Gazprom (RTS: GAZP) a balance of $500 million for gas delivered in May, Ukrainian Fuel and Energy Minister Yuriy Prodan told journalists in Kyiv on Wednesday.

"Right now, according to my information, we have another $500 million [to pay]. There is  still time before June 7 and I think the money will be found," he said.

Commenting on concerns over Ukraine's ability to pay expressed by senior Gazprom officials, Prodan said. "We hear that a lot, but Ukraine has always settled on time and I think that's the way it will be in future," he said.

Gazprom CEO Alexei Miller had previously expressed concern over whether Ukrainian national oil and gas company Naftogaz Ukrainy would be able to pay for gas delivered in May on time and in full. He did not rule out a shift to 100% prepayment for gas.

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Source: Itar-Tass, Interfax