Economics of Russian-Ukrainian Gas Conflict:
Who won the war? - Updated
RosUkrEnergo may be the
real winner. Free market in Russia is the loser. We
made these estimations before the the text of Gazprom-NAK Naftogaz agreement
was published.
The "gas war" is over. Statements of Russian
and Ukrainian parties are not quite clear yet. The only clear numbers are
the export price of $230/mcm (mcm = 1000 m3) of Gazprom and the average
import price of $95/mcm of Ukraine. According to our calculations, this
combination works only if Gazprom exports to Ukraine a maximum of 6.5 bcm of
gas per year. Turkmenistan is to supply 40.0 bcm and 10.0 bcm is to be
delivered from Uzbekistan and Kazakhstan. Table 1 below summarizes gains and
losses of involved parties, except for RosukrEnergo.
Table 1. Gains and
Losses of the Gas Conflict: Preliminary Estimations
|
Unit
|
2005
|
2006
|
|
NAK
Naftogaz of Ukraine: |
|
|
|
Average price of imported gas
|
$/mcm
|
63.6
|
95.0
|
Volume of imported gas
|
bcm
|
58.0
|
56.5
|
Cost of imported gas
|
$ billion
|
-3.7
|
-5.4
|
Ukrainian transit tariff
|
$/mcm/100km
|
1.09
|
1.60
|
Transit revenue
|
$ billion
|
1.6
|
2.3
|
Balance
|
$ billion
|
-2.1
|
-3.1
|
|
|
$ billion
|
-
|
-1.0
|
Change after payment from RosUkrEnergo
|
$ billion
|
-
|
?
|
|
Gazprom: |
|
|
|
Price of exported gas
|
$/mcm
|
50.0
|
230.0
|
Sales to Ukraine
|
bcm
|
21.0
|
6.5
|
Sales revenue
|
$ billion
|
1.1
|
1.5
|
Sales revenue net of export duties
|
$ billion
|
0.7
|
1.0
|
Transit volume of gas from Central Asia
|
bcm
|
37.0
|
50.0
|
Transit revenue:
|
$ billion
|
0.3
|
0.7
|
Ukrainian transit cost
|
$ billion
|
-1.6
|
-2.3
|
Balance
|
$ billion
|
0.2
|
0.3
|
|
|
$ billion
|
-
|
0.0
|
Gas available for additional sales
|
bcm
|
-
|
14.5
|
Gazprom price of for RosUkrEnergo
|
$/mcm
|
-
|
93.0
|
Sales revenue net of export duties
|
$ billion
|
-
|
0.9
|
|
|
$ billion
|
-
|
0.9
|
|
Russia: |
|
|
|
Export duties
|
$ billion
|
0.3
|
0.9
|
|
|
$ billion
|
-
|
0.5
|
NAK Nafotagaz of Ukraine loses about one
billion dollars a year before getting its share from RosUkrEnergo. The
Ukrainian firm decided not to introduce storage capacity reservation fee for
Gazprom.
Gazprom breaks even in terms of transit
relations with Ukraine, but saves 14.5 bcm for additional exports.
Apparently, the additional exports go through RosUkrEnergo, though having a
broker for exports of Russian gas does not make sense. It does make a lot of
sense in case of Central Asian gas because transit sales of foreign broker
are exempt from export duties.
Gas price at the European border has nothing
to do with the price of gas sold by Gazprom to RosUkrEnergo. According to
Gazprom report for Q2-2005, in the first half of 2005, Gazprom was
selling gas to RosUkrEnergo in Ukraine at $93/mcm, while the average
European price was $174.4/mcm. The broker then exported gas to Europe. Half
of the profit of RosUkrEnergo is reported in the books of Gazprom and
another half elsewhere. We are unfamiliar with the operating expenses of
RosUkrEnergo. Apparently, the Swiss broker plans to increase re-exports to
Europe in 2006 while buying more gas from Gazprom at a discount.
In our view, a 100% daughter company of
Gazprom, like Gazprom UK or ZMB GmbH, could be a better foreign
intermediary for Central Asian gas, especially if the transactions were set on non-profit basis and
all profits went to the shareholders of Gazprom. RosUkrEnergo makes profits
for other parties and transfers them to Switzerland.
Russian state is a winner with an additional
tax collection of $0.5 billion a year.
Final gains of Gazprom and RosUkrEnergo are unclear, though it looks like the Swiss broker gets a major
boost right before the announced IPO. This is a nice coincidence.
The Russian free market is a clear loser.
Several independent gas producers in Russia can easily beat the $230 price
of Gazprom. However, nobody dares even to think of making an
offer to Ukraine. Selling gas to Russian consumers at state-regulated price
of $30-$45/mcm is more safe.
Mikhail Korchemkin
January 4, 2006
Previous publications on
Russian-Ukrainian gas dispute:
Russian-Ukrainian Gas Conflict: Lack of Free Market in Russia
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
