Ukraine cuts gas production by 4.7% in 2014

Ukraine cut gas production by 4.7% or 1 billion cubic meters in 2014, compared to 2013, to 20.5 billion cubic meters, the press service of national joint-stock company Naftogaz Ukrainy has reported.

"Private producers increased gas production by 18%, to 3.3 billion cubic meters of gas. Production by state-run Ukrgazvydobuvannia did not change, being 15.1 billion cubic meters. Public joint-stock company Ukrnafta cut production by 10% in 2014, to 1.7 billion cubic meters. After the annexation of Crimea in March 2014, Ukraine received only 300 million cubic meters of gas from Chornomornaftogaz compared to 1.7 billion cubic meters of gas extracted by the company in 2013," reads the report.

The main reason for the difference between the figures of private and state companies is the regulated prices of gas, Naftogaz said.

"Private gas producers in Ukraine sell their gas at UAH 5,900 (around $350) per 1,000 cubic meters before paying royalties, which is almost the same as the price of imported gas of Q4, 2014. Ukrgazvydobuvannia receives UAH 349 (around $20) per 1,000 cubic meters of gas before paying royalties," reads the report.

Naftogaz said that the full efficient production cost for Ukrgazvydobuvannia, which will attract investments in exploring new fields and increased gas production, is around $220 per 1,000 cubic meters, not taking into account royalties.

"For Ukrnafta the upper limit for the price of gas is set at UAH 530 (around $30) per 1,000 cubic meters before paying royalties. Ukrnafta challenged the purchase of gas by Naftogaz several times in 2006-2011 at the price set by the regulator, claiming that the price even did not cover the production cost of gas," reads the report.

Naftogaz said that the holding has not received gas produced by Ukrnafta to satisfy needs of Ukrainian households since 2012. Naftogaz Ukrainy holds 51% of shares in Ukrnafta, but the holding does not manage Ukrnafta's operations," reads the report.