The Cabinet of Ministers suggested that big industry searches for gas on its own

Photo: Reuters

This week Premier Arseniy Yatsenyuk intends to hold another meeting with the largest industrial consumers of gas to jointly develop supportive measures. Capital’s sources say Minister of Energy and Coal Industry Yuriy Prodan was assigned to arrange the next meeting.

Last Friday the premier gathered representatives of the Ukrainian industry to offer them to solve the problem of provision of their companies with fuel independently. “We accumulated 14 bn cubic m of gas in our reserves. We find the source of gas – we will supply it to the industry. In case we do not find it – we will have to survive in tough conditions. You have to be ready for this,” he warned.

Participants of the Friday’s meeting said in a conversation with Capital that at the new meeting they will focus on licensing industrial enterprises or their affiliated companies for the supply of imported gas. “If you can agree on supplies on your own, then do it. We are ready for any forms of cooperation to provide our industry with gas. Naftogaz will give permission to deliver such fuel,” Yatsenyuk told Ukrainian industrialists at the meeting. But experts and foreign suppliers interviewed by Capital doubt that it is possible to arrange such supplies today. Ukrainian industry consumes a lot of gas: based on results of 2013 the amount was close to 20 bn cubic m, which is 40% of total consumption in Ukraine. Most of that gas was imported.

Make way for intermediaries

By and large, the additional provision of licenses is not a prerequisite. Acting President of the Ukrainian NGO Union of Members of Gas Market Liberalization Oleh Bakulin says our country has all the necessary technical and legal conditions for independent purchases of gas abroad without participation of Naftogaz. As of today, almost 280 companies were issued licenses for the supply of gas at non-regulated tariffs. “Most likely, only close to 30 of them are actually operating, but this is sufficient for industrial enterprises to purchase gas by contacting dealers,” he said.

According to the expert, since April Naftogaz has not allowed independent procurement of fuel by private companies, even if they have not only the desire but also existing contracts. At the same time, there is technical potential and ability to deliver gas to industrialists. Based on the data of the FGSZ (Hungarian gas system operator), at the moment the system of gas transit from Hungary to Ukraine is not used at its full capacity: in terms of a daily throughput capacity of 15 – 16 mn cubic m of this line in July, the actual daily pumping volume did not exceed 3.9 mn cubic m. It is worth mentioning that now is the best time for the accumulation of gas. “We are not in the middle of the heating season and we can import gas at lower prices, pump it into the UGSF and consume it in the winter. This way we can cover the demand for gas,” assured Bakulin. However, as Capital was told by several members of the Friday’s meeting, Prodan told industrialists not to count on reverse supplies of gas from Europe.

Calling an old “friend”

There is a purely technical opportunity to buy Russian gas. A partner at the RusEnergy consulting agency Mykhailo Krutikhin admitted in a conversation with Capital that private Ukrainian companies in search of gas could appeal to Gazprom’s office in Moscow. “It is quite possible, given that there are known cases,” he confirmed.

Krutikhin noted that the purchaser of gas in this case must be a respectful and solvent company. “Possible deliveries may amount to 2.1 bn cubic m (such an amount is relatively small), provided that it will be a reliable customer. Anyway, Gazprom works in this way with some European companies,” said Krutikhin.

However, the interlocutor decided not to predict the success of such attempts: Gazprom is a political organization, but not at all a commercial company. The decision will be made at the level of the president of Russia. As it is known, on June 16 the Russian government switched gas supplies to Ukraine to terms of prepayment. Gazprom’s press service did not answer Capital’s question whether the Russian monopoly is ready to consider selling gas to private Ukrainian companies.

However, an expert at Eavex Capital Dmytro Churin believes that it is unlikely that any private structure is capable of replacing Naftogaz in the purchases of Russian fuel. “I do not see any possibilities that a state company could be replaced with another entity to represent the interests of the industry given the current political situation. To me it sounds a bit too fantastic,” he said.
Yuriy Prodan also expressed doubt that exporters will be able to achieve the signing of individual contracts with Gazprom bypassing Naftogaz. Theoretically, one of Dmytro Firtash’s companies could become such a supplier, which last year delivered to Ukraine 12 bn cubic m of gas in such a manner. But answering Capital’s question about future gas supplies in the new season, a representative of Ostchem said the company does not comment on “future contracts and theoretical transactions until they are sealed”, and assured that the company “has not signed contracts for reverse gas supplies to Ukraine”.

Turkmenistan under lock and key

In search of available gas the Ukrainian industry may recall the existence of Turkmenistan with which our country signed an agreement on gas supplies back in 2002 – 2006. But yesterday representatives of the Turkmengaz state concern and the Ministry of Oil and Gas Industry and Mineral Resources of Turkmenistan could not give an answer in a telephone conversation with Capital whether they are ready to sell gas to Ukrainian companies and whether they have free resources for that.

However, Krutikhin noted that the purchase of gas by Ukrainian companies in Turkmenistan with further transportation through the territory of Russia is impossible: “For several years Gazprom has not been working with transit – it buys Turkmeni gas, but exports only its own products”. The expert reminded that Ukraine has signed and ratified the Energy Charter Treaty, which includes the obligation of its members to facilitate the transit of energy materials and products through their territory. “Russia also signed it, but refused to ratify, and President Putin personally announced that Russia is withdrawing from the agreement. Therefore, no gas transit through the territory of Russia is possible,” he explained. The geographical remoteness of Turkmenistan should also be taken into account, which is why the cost of transportation may significantly raise the price of the end product.

Hopes of the industry

Yet there are companies that are confident they are capable of resolving the issue of gas supplies if they are issued licenses to carry out such operations. “Our parent company could arrange gas supplies from Europe to provide for our company if such a license is issued,” said Director of the Kyiv office of ArcelorMittal Kriviy Rih Volodymyr Tkachenko in a conversation with Capital. He was the only representative of steelmakers at the meeting with the premier. Tkachenko says exporters were promised maximum favoritism in terms of entering into independent contracts with gas suppliers. In the event there is no such support and supplies are cut, the company may extensively reduce the load, he said. “For our enterprise the decline in gas consumption by 20% or even more may have extremely negative consequences,” confirmed Tkachenko.

Rinat Akhmetov’s Metinvest is also confident of its potential. The holding has no reserves of natural gas of its own, as Capital was told by the press service of the company, but DTEK, which is a member of the SCM group, has fuel reserves. Today, DTEK is the main supplier of gas for the Metinvest group. “In case shortages of gas supplies from Russia continue, there are possibilities of its acquisition from a third party or in Ukraine,” said a representative of Metinvest.