Naftogaz Prepares Ground for Arbitration Awards

Interfax Ukraine has reported that the commercial arbitration between Ukraine and Gazprom in Stockholm will next month release Ukraine from the take-or-pay clause – a common feature of most long-term gas contracts, where the producer has to carry the costs of gas production and transport.

Citing CEO Andrei Kobolev and deputy foreign minister Olena Zerkal, Interfax said the ruling would also allow Ukraine to re-export gas, a ban that has been lifted in Gazprom's contracts with European Union companies, in accordance with competition law.

Most critically, the judgement will allow for the revision of prices in supply contracts with Gazprom in light of market conditions.

Gazprom and Naftogaz have been in dispute in the arbitration tribunal in Stockholm since June 2014, Ukraine seeking $17.9bn compensation from Gazprom for overpayment; or $14bn excluding interest. For its part, Gazprom is seeking $2.9bn as payment for gas supplied November 2013 - May 2014 ($2.2bn dollars excluding interest) and $42.8bn in respect of "take or pay".

In a statement May 31, Naftogaz said: "A separate award is expected to decide all legal and factual issues required to resolve the parties' claims, except certain elements and/or values of a numeric or quantifiable nature. All remaining issues and any resulting monetary claims are expected to be left for the final award to be rendered at a later stage. It is envisaged, that the separate award is going to be final and binding." The award is expected in June.

Separately the two are also disputing a ship-or-pay contract, whose resolution is necessary before Naftogaz Ukrainy, which holds the transport contract with Gazprom, may unbundle its transportation assets.

William Powell