Ukraine Starts Negotiations with German RWE for Gas Imports

KYIV, Ukraine, May 14, 2012 /PRNewswire/ --



Ukraine's state owned OJSC oil and gas company Naftogaz signed a framework agreement with the Germany's RWE Supply & Trading GmbH (RWEST) concerning gas supplies, according to the press service of Naftogaz. The agreement provides legal grounds for future natural gas supplies from RWEST to Ukraine.

Naftogaz plans to cooperate with RWE regarding the supply of spot gas purchased in Europe via Slovakian pipelines. Naftogaz is set to start out with importing around three million cubic meters of natural gas from Europe per day. This calls for the reverse use of GTS - an option Ukraine reportedly considered earlier. Such decision would allow Ukraine to diversify its gas imports which for now come only from Russia.

Buying the Russian gas from the German company RWE would be cheaper than buying directly from Russia's Gazprom, stated Ukrainian Prime Minister Mykola Azarov in his interview with German newspaper Die Welt.

Price, volumes, and detailed obligations of Naftogaz and RWE concerning the natural gas supplies will be provisioned by additional contracts, which are yet to be negotiated.

RWE Supply & Trading GmbH is a leading European energy trading house, according to the Web site of the company. It provides energy solutions to over 400 major international industrial corporations with production sites in Europe.

Interestingly, the daily spot price for natural gas fluctuates between USD 250 and USD 350 per one thousand cubic meters. Ukraine, on the other hand, is being charged USD 516 per thousand cubic meters for Russian gas. Since 2010 Kyiv has been receiving a USD 100 discount for letting the Russian Black Sea Fleet stay in Crimea. Even though, Ukraine will have to spend almost 27 percent of its estimated budget income in 2012 for the Russian gas (around USD 8-10 billion).

Notably, the reverse use of existing gas pipelines and trans-Caspian project have been identified as Ukraine's major ways to diversify sources of gas supply. The trans-Caspian gas pipeline would allow Ukraine to transport liquefied natural gas from the Georgian oil port of Kulevi on the Black Sea by tankers to south Ukrainian LNG Terminal Yuzhny.