Naftogaz Sets up Retail Trade Unit

Ukrainian gas company Naftogaz has set up a separate division to handle retail gas trading, following the liberalisation of Ukraine's household gas market six months ago, it said on February 1.

Ukraine's government ended last summer the public service obligations (PSOs) in the household gas market that required Naftogaz to supply gas from its production arm for sale to residential consumers at regulated tariffs. The ending of the PSOs has given households a free choice of supplier, said Naftogaz.

In place of these obligations, Naftogaz was appointed in July as a supplier of last resort, which provides gas to consumers that are unable to get supplies from elsewhere, typically after defaulting on their debts.

Naftogaz said creating a separate division would help it develop retail gas trade. It will be led by Maxim Rabinovich, Naftogaz's head of gas supply. Another unit will handle the wholesale trade of gas and liquid hydrocarbons.

Ukraine has chalked up significant progress reforming its gas market in recent years, including the partial liberalisation of household gas prices. However, its cabinet introduced a cap on prices in January, to support households while coronavirus restrictions are in place, in a move that prompted concerns from the IMF and Ukraine's other financiers.

"This is a populist move in response to public protests in several key regions, including Kharkiv, related to recent gas price hikes for households," Alexander Paraschiy of Kyiv-based Concorde Capital said in a note. "To score political points with them, the government is attributing its decision to concern for tough economic conditions under the nationwide lockdown imposed on January 8 to cope with the coronavirus pandemic."

Naftogaz said on January 28 it had begun signing agreements with retail firms on the supply of gas in February on special terms, ensuring they do not incur losses as a result of having to sell gas at lower tariffs. The cap on prices will remain in force until the end of March.