Naftogaz Ukrainy Had Profitable 2016
State-run Naftogaz Ukrainy made a profit of hryvnia 22.5bn ($860mn) in 2016, according to accounts audited by Deloitte. This was the first profit in five years, according to CEO Andriy Kobolev. It was the country's biggest taxpayer, paying over three times its profits – hryvnia 74bn ($2.83bn) – to the government and accounting for a tenth of the budget.
In the crisis year 2014, when it made a loss of hryvnia 88.4bn, Naftogaz accounted for nearly a quarter of the state's expenditure. "We ensure not only reliable gas supply to Ukrainian households but also its sufficiency for all other consumer categories, even in extremely difficult circumstances. These are the major results of three years of our team’s work,” he said June 9.
Gas transmission and distribution was the most profitable, generating over hryvnia 26bn in profit, while gas production yielded hryvnia 15.3bn in profit. Oil refining and transportation yielded hryvnia 3.3bn, but oil and condensate production were loss-making. Gas trading was also loss-making however, at hryvnia 3.5bn and gas storage lost hryvnia 1.6bn. Unallocated expenses of hryvnia 11.9bn went on law suits, foreign exchange losses and other items.
Working with international financial organisations allowed the management to cut expenses. The average interest rate for the group fell by 1.4% from 13.5% in 2015 to 12.1% in 2016, saving it nearly hryvnia 1bn.
And Kobolev said the company was the biggest user of Ukraine’s corruption-beating tendering platform, ProZorro: "Since its official launch in 2016, enterprises of Naftogaz group held 13,000 open bidding procedures in it and saved hryvnia 8.4bn – 9% of the expected cost."
Kobolev also commented on the twin arbitration cases in Stockholm relating to the 2009 gas contract between Ukraine and Russia. "The tribunal completely rejected Gazprom’s “take-or-pay” claim of more than $44bn. The arbitrators also satisfied Naftogaz claim to make the gas price market-reflective, switching from 100% reference to petrochemical price to 100% reference to gas market price," he said. NGW understands that the contract has been priced off the NetConnect Germany hub since 2014, although Ukraine has not bought any gas from Gazprom for over 18 months.
Another award, which regards gas transit contract with Gazprom and where Naftogaz is the principal claimant demanding nearly $12bn, is expected within several months, he said.
Still unresolved is the relatively small matter of gas used in 2014, where Gazprom claims it is owed for deliveries that were never paid for.
William Powell