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Giant leap to centralized economy and a
blow to the reputation of Gazprom
On January 1, 2006, Gazprom started active
warfare in the gas transit dispute with Ukraine. In our view, it
demonstrates the lack of free market in Russia.
Under conditions of free market, Russian
independent gas producers would have been knocking at the border of Ukraine
now. Russian independents would prefer exporting gas to
Ukraine at $100/mcm (mcm = 1000 m3), rather than selling it to consumers in
Russia at state-regulated price of $30-$50/mcm. The most important condition
of such sales - availability of spare capacity in gas pipelines - is also
there.
However, things in Russia are moving the
opposite direction. Gazprom has contracted more than all Turkmen gas for the
next three months at $65/mcm at the border of Turkmenistan to resell it to
Ukraine at $230. Note that in our view Turkmenistan is unlikely to accept
the profits going one way to Gazprom.
We were unpleasantly surprised by the
fussiness shown by the Russian side, when they wanted to press a "free
gift" on Ukraine in the last hours of 2005. Sudden change of terms and
five-hour time limit for signing a new contract are typical at handing a lemon,
but not at a multi-billion dollar deal.
Recent statements of Russia's and Gazprom
officials disagree with previous statements of the same authorities.
Statement on Deliveries of Russian Gas to Ukraine, December 29, 2005,
Novo-Ogaryovo. VLADIMIR PUTIN: In this case I am quite worried about the
deliveries of gas to Ukraine. […] I understand that the final agreements
have not yet been reached. This is very bad, especially bad because
already in March of this year with the President of Ukraine, Viktor
Andreevich Yushchenko, we agreed on the transition to a market-based
regime for payments in energy including in the gas sphere.
Press Conference on the Results of Russian-Ukrainian Talks, March 19,
2005, Kiev. VLADIMIR PUTIN: Today, Viktor Andreevich [Yushchenko] and I
really did give quite a lot of attention to this [natural gas] topic. The
President formulated his approach, which is that we will not try to
re-examine the agreements reached. We agree with this.
S.Kuprianov, press secretary of Gazprom,
January 3, 2006: Gazprom prepaid Ukrainian transit services in cash back in
2004. There shouldn't be any questions to us about it.
Gazprom on Settlement of Ukraine's Debt for Natural Gas Deliveries between
1997 and 2000. August 11, 2004: Gazprom also made a single advance
payment of USD 1.25 billion to Naftogaz of the Ukraine as payment for the
transit of 19.2 bcm of gas via the Ukraine over 2005 to 2009. Said
advance payment will make it possible to fix USD 1.09/1,000cm/100km as a gas
transmission tariff between 2005 and 2009.
Apparently, Gazprom wants
to forget the second half of the debt settlement agreement.
Previous statements of Gazprom about the mutually beneficial transit
terms with Ukraine also are in contradiction with the current actions of the
Russian gas monopoly. Gazprom statement of June 2005 also indicates that
there was no agreement reached in March. It is absolutely impossible for
deputy head of Gazprom A.Ryazanov to say in June that the $50/mcm price for
Ukraine suited Gazprom just fine, if Mr. Putin have said the opposite in
March of the same year.
According to our
estimations, Gazprom will lose from the introduction of "European" gas price
for Ukraine. Main financial losses will be caused by the following
anticipated actions of Ukraine.
-
Cancellation of free
use of Ukrainian gas storage facilities by Gazprom and introduction of
"European" tariff for storage capacity reservation of up to $180 per one
cubic meter per hour.
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Raise of the Ukrainian
transit tariff to the rate currently paid by Gazprom in Bulgaria or
Austria.
-
We are surprised by
the lack of distinct response of the Ukrainian side. NAK Nafogaz
of Ukraine should either clearly indicate that Gazprom violates the
existing contract or present new transit tariff and storage reservation
fees.
The table below shows
sample gas balance of Ukraine in winter and summer. Huge underground
storage facilities of western Ukraine
play vital role in providing export flows of Russian gas to Europe in winter
time.
Table
1. Ukrainian Gas Balance, million cubic meters per day
|
December 2004
|
August 2005
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Gas input:
|
|
|
Ukrainian production
|
56
|
55
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Central Asian gas
|
86
|
104
|
| Russian
gas |
435 |
399
|
| Ukrainian
storage withdrawal |
137
|
-
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Total:
|
700
|
559
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Deliveries and transit:
|
|
|
Ukrainian consumption
|
303
|
117
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Ukrainian storage injection
|
-
|
93
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Transit to South Russia
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1
|
63
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Transit to Moldova
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11
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4
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Transit to Europe
|
384
|
281
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Total:
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700
|
559
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Source:
Energobiznes (http://www.e-b.com.ua/)
Total loss of Gazprom will
exceed the revenues from gas sales at $230/mcm. Part of the loss can be
compensated by resale of Turkmen gas, by the overall result will still be a
loss (see table). Profits from
future resale are not clear and the Turkmen-Gazprom deal itself does not
look final yet.
Reputation of Gazprom
as a reliable supplier of gas to Europe was damaged.
We believe, Gazprom
accepts moral and financial losses as the price to get control over Ukrainian gas export
pipelines. It looks like valuable assets are treated one after another, one
at a time: Yukos, Sibneft, Ukrainian gas pipelines...
Mikhail Korchemkin
January 3, 2006
Previous publications on
Russian-Ukrainian gas dispute:
Economics of Russian-Ukrainian Gas Conflict:
Summary for Beginners
Russian-Ukrainian Gas Conflict: Financial
Effects of the Russian Side
- 2
Russian-Ukrainian Gas Conflict: Financial Effects of the
Russian Side
Brief
history of Soviet and Russian gas pipeline policy
Clarifying
the math of Ukrainian transit tariff
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