Gazprom Says Ukraine Gas Bill May Drop $8 Billion In Union

MOSCOW, Russia -- OAO Gazprom, Russia’s gas exporter, said Ukraine could save $8 billion a year on annual purchases by joining a customs union with Russia, Kazakhstan and Belarus.

Ukraine would benefit from buying gas at Russian domestic prices rather than rates linked to European prices, Gazprom Deputy Chief Executive Officer Valery Golubev said today at an energy forum in Moscow.

The potential savings are based on purchases of 40 billion cubic meters of gas a year, he said.

Russia, Belarus and Kazakhstan formed a customs union at the start of this year, with duty-free energy exports. Gazprom shipped about 70 percent of its Europe-bound gas across Ukraine last year and the rest via Belarus.

Price disputes with Ukraine have disrupted European supplies at least twice since 2006.

“The figure of $8 billion sounds top heavy,” Timothy Ash, the head of emerging-market research at the Royal Bank of Scotland Group Plc in London, said by e-mail today. “A gain of $6 billion is, nevertheless, nothing to be sniffed at.”

The lower amount would still be enough to push Ukraine’s current account back into surplus, boost industry and ease the political pressure of liberalizing domestic gas prices, Ash said.

Russian gas prices will remain lower than in Europe even as the government plans to increase regulated prices for industry through 2015 to boost domestic margins to the level of sales abroad, Golubev said.

Gazprom expects Ukraine to reduce transit tariffs, Golubev said. The cost of the gas bought by Ukraine to power pipeline pumping stations would drop so the transit rates should fall as well, he said.

NAK Naftogaz Ukrainy, Ukraine’s state energy company, said today that it paid Gazprom $1.25 billion for gas imported in March.

Source: Blooomberg