Ukraine Mulls Gas Project With Gazprom, Vows Secure Supplies

KIEV, Ukraine -- Ukraine is “potentially interested” in a joint project of state-run energy company NAK Naftogaz Ukrainy and OAO Gazprom that might include an exchange of assets, Prime Minister Mykola Azarov said.

Ukraine's PM Mykola Azarov

Russian Prime Minister Vladimir Putin offered to merge the country’s gas monopoly Gazprom with Naftogaz at a meeting with Azarov on April 30. Naftogaz moves about 80 percent of Russia’s Europe-bound gas exports via its Soviet-era transportation network and Russia has sought control over it.

“Ukraine is interested in getting access to gas and oil reserves of Russia because we don’t have such deposits and resources,” Azarov said in an interview in Luxembourg. “The Russian counterparts are interested in participating and running our gas transportation system and its modernization.”

The idea “is being developed and pondered by the networks of Gazprom, Naftogaz and corresponding ministries,” Azarov said, adding that a decision will be made “when we reach a mutually beneficial compromise.”

Naftogaz, which currently pumps about 100 billion cubic meters of gas a year, is seeking to upgrade its pipelines. The system capacity totals 142 billion cubic meters of gas a year and the company wants Russia and the European Union to cooperate on upgrading the pipelines, which may cost as much as $4 billion, its chief executive officer said last month.

Russian Relations

Ukraine has focused on relations with Russia since President Viktor Yanukovych took office in February and formed a cabinet loyal to him in March.

Two months ago in Kiev, Putin suggested forming a nuclear energy holding company between the two former Soviet Union republics after Russia agreed to cut gas prices for Ukraine by 30 percent through 2019.

The warming of ties came after Russia cut gas supplies to Ukraine in 2006 and 2009, when the country was governed by President Viktor Yushchenko, who took office on promises to join the North Atlantic Treaty Organization, or NATO.

A dispute with Russia in January last year left more than 20 countries in Europe without gas for almost two weeks in freezing temperatures.

“There’s no reason for the European consumers to fear any gas disruptions or situations similar to January 2009,” Azarov said. “All we need to ensure is that Naftogaz is having an efficient management and with the stable leadership in the country, with the president and prime minister being one team, we shall definitely prevent any potential hiccup or disruption in gas supplies to Europe.”

He also said Ukraine wants to have close relations with both the 27-nation European Union, which it borders to the west, and its eastern neighbors.

“We believe that building tighter links with eastern partners, including Russia, as well as other countries in the east and tighter relationships with the EU are two vector processes that we’re to pursue, with the final objective of benefiting the Ukrainian economy.”

Source: Bloomberg