Ukraine Turns to Germany for Gas

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Ukraine Turns to Germany for Gas

PR Newswire KYIV, Ukraine, November 2, 2012

KYIV, Ukraine,November 2, 2012/PRNewswire/ --

Ukrainian state-owned gas-managing company Naftogaz signed a contract with German RWE regarding the supply of one million cubic meters of natural gas per day in November - December of 2012. The gas will go through the pipeline systemDrozdovychithat connects the two countries via Polish territory.

The terms of the short-term contract stipulate a somewhat lower price for gas than that provisioned by the current contract with Russia, stated Naftogaz official Pavlo Afanasiev. After the two-month contract expires, the sides plan to discuss long-term commitments regarding the supply of gas in the reverse direction, i.e. from Europe to Ukraine.

Notably, in October -December 2012, Ukraine will have to payUSD 432(includingUSD 100discount) per thousand cubic meters of Russian gas. InApril 2012, the Prime Minister of Ukraine Mykola Azarov informed that Poland paid USD 310.

InMay 2012, Naftogaz signed a framework agreement with RWE Supply & Trading GmbH that provides legal grounds for future natural gas supplies from Germany to Ukraine. Naftogaz planned to cooperate with RW E regarding the supply of spot gas through Slovakian pipelines, but the company official stated that Russian Gazprom made an attempt at hindering such arrangement, while additional technical shortcomings prevented the project from being put to life, informedrbc.ua.

The amount of gas Ukraine buys from RWE may reach 12 million cubic meters per day, said Afanasiev. The annual import may amount to approximately 5 billion cubic meters of natural gas. Current capacity of the pipeline through Poland, which is planned to be used for the transport of gas, is 4.38 billion cubic meters of gas per year. Additional gas may be supplied through an alternative route via Hungary.

Ukraine has been seeking partners to buy gas from both inEurope and Asia in order to decrease energy dependence on the supplies of natural gas from Russia.

To diversify gas supply, Ukraine plans to facilitate liquefied gas import from remote suppliers. The country is currently building a liquefied natural gas terminal. Its technical development will be finalized byDecember 2012, according toukrproject.gov.ua. By 2015 the terminal will allow processing of 5 billion cubic meters of gas per year.