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Naftogaz offers reserve option of gas transit with Gazprom

The Ukrainian company is ready to sign a swap contract rather than a transport one.

Naftogaz offers reserve option of gas transit with Gazprom
Photo: UA Energy

The national oil and gas company Naftogaz Ukrayiny is ready to sign a gas swap contract with Russia's Gazprom, not the one on gas transport, Naftogaz's executive director Yuriy Vitrenko has said.

He was commenting on Gazprom's complaints to the national energy regulator and the operator of the Ukrainian gas transport system.

Naftogaz said they could be cleared in two ways.

The first is to bring the law on the national regular in line with the constitution as soon as possible and follow the unbunding plan developed by Naftogaz.

The second option is to sign a gas swap contract. In this case, Gazprom will transfer a certain amount of gas at the border and Naftogaz will transfer it to the next operator in Europe.

In this case, the signing of the contract with the operator of the gas transport system will be transferred from Gazprom to Naftogaz and the margin (payment for transit) will be agreed by the signatories, not the regulator.

"We are satisfied with the EU proposal on the transit contract - 10 years, the average must be at least 60bn cu.m. of gas per year. We can use the same parameters in a contract on gas swap," Vitrenko said on Facebook.

"Such a contract is relatively simple, it is not subject to regulation by the Ukrainian side, no-one should pay anyone for facilities, etc., therefore Gazprom has no reasonable grounds for refusing to sign it. Our reserve option makes it possible to achieve the same result but, at the same time, Gazprom loses the arguments indicated by Mr. Kuznets to stop transporting gas through Ukraine," Vitrenko said.

The 10-year transit contract between Naftogaz Ukrayiny and Gazprom expires on 1 January 2020. The latter is currently not negotiating the signing of a new contract for transit through Ukraine and is strongly promoting the Nord Stream-2 and Turkish Stream projects.

Vitrenko earlier said that at the trilateral gas talks, Ukraine would suggest that Russia book 60bn cu.m. in annual transit capacity for the period of 10 years.

However, Gazprom said that it was not prepared to sign a gas transit contract with Ukraine on European terms on which Naftogaz had insisted.

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