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Naftogaz crashes Gazprom in Stockholm Arbitration

Russia's 56bn dollar take-or-pay claim rejected.

Naftogaz crashes Gazprom in Stockholm Arbitration
Photo: Photo: UA Energy

The Stockholm arbitration has satisfied Naftogaz's basic requirements on the 2009 gas supply contract.

In a release on 22 December, Ukrainian oil and gas company said that the Swedish arbitration entirely rejected Gazprom's claim 56 bn dollar claim for the take-or-pay contract provision in 2012 – 2017. The arbitration also let Naftogaz to reduce ten-fold mandatory annual imports of Russian gas in accordance with actual needs.

The court also lowered the price of Russian gas for Ukraine in Q2 2014 by 27.4% down to 352 dollars per thousand cu m. Gazprom demanded Ukraine to pay for gas delivered in the spring of 2014 at 485 dollars per thousand cu m. The revision of the price will save Ukraine 1.8 bn dollars for the period of 2014 – 2015 alone.

"The arbitration court invalidated bondage provisions of the contract bringing it to the European market standards. Naftogaz estimates the overall positive effect of arbitration awards at over 75 bn dollars over the life of the gas contract," the company said.

The arbitration award on the transit contract is expected on late February next year.

On May 31, Stockholm Arbitration satisfied Naftogaz's requirement to revise the gas price taking into account market conditions from April 2014.

The arbitration ordered to void the provision of the contract between Naftogaz and Gazprom on the principle of take or pay, and cancelled the ban on Ukraine's re-export of gas.

At the same time, Naftogaz is entitled for the compensation due to overpayment for gas in Q4 2014 and in 2015. At the same time, Gazprom will be able to receive an additional payment for gas supplies in Q2 2014.

Gazprom on 7 November filed an appeal against the interim award of Stockholm arbitration in the suit in the 2009 gas supply contract, and its partial cancellation.

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