Naftogaz Warns of Political Forces Against Unbundling

Income from gas transit covered almost a quarter of Naftogaz’ payments to the Ukrainian state.

Without such income business, Naftogaz would have paid hryvnia 66.7bn ($2.5bn) to the state budget, instead of the actual hryvnia 91.6bn ($3.4bn) that it contributed during the first nine months of 2017, the state-owned gas group said November 3. 

That hryvnia 24.9bn ($0.9bn) is close what the government spent on education for the period, and almost one and a half times more than what the government spends on health, sport and environment combined, said Naftogaz. Without this transit revenue, the government would have had to advance Naftogaz at least hryvnia 5bn, thereby increasing government debt, it said.

But this income in future will be lost if "political groups" succeed in blocking the unbundling of transport. Naftogaz CEO Andrei Kobolev said. Keeping the transit business as a going concern will only be possible if Ukraine can attract a qualified western partner to manage it.

Sadly, the appearance of such a partner does not guarantee the continuation of transit, but its absence definitely guarantees the end of it, Kobolev told the twentieth international Oil & Gas Conference this year. Naftogaz performed the tax calculation at the request of one of its partners. The company is in talks with four possible investors, including Eustream and Snam which signed a memorandum of understanding April 10 with Naftogaz and transport arm Ukrtransgaz. 

The memorandum is aimed at maintaining the quality of natural gas transmission in Ukraine, in line with the standards of European markets; ensuring that the pipelines are operated in a safe and efficient manner; and that access is granted on a transparent and non-discriminatory basis, in compliance with the applicable legislation.

William Powell