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Gazprom makes official proposal to Ukraine's Naftogaz for 1-year gas transit deal

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Gazprom makes official proposal to Ukraine's Naftogaz for 1-year gas transit deal

London — Russia's Gazprom said Monday it had made an official proposal to Ukraine's Naftogaz Ukrayiny to enter into a one-year gas transit deal, either as an extension of the parties' existing 10-year contract or under a new agreement.

The current deal between Gazprom and Naftogaz expires at the end of 2019 and there is concern that without a new contract to take effect from January 1, Russian gas transit to Europe via Ukraine could be disrupted.

In a statement, Gazprom said it had sent a letter to Naftogaz -- signed by Gazprom CEO Alexei Miller -- to "extend the existing contract or to conclude a new gas transit agreement through Ukraine for a period of one year."

The volumes would depend on the amount of forecast demand from European gas buyers for 2020, it said.

The Gazprom proposal came with a number of caveats, however, some of which the Russian giant has previously said it would insist on before any new transit deal could be signed.

It said:

**all mutual claims in international arbitration must be dropped;

**the decision of the Antimonopoly Committee of Ukraine to impose a fine on Gazprom for alleged abuse of its dominant position must be annuled;

**and an application made by Naftogaz to the European Commission to initiate an investigation against Gazprom must be withdrawn.

In addition, Gazprom said it was awaiting the position of the Ukrainian side regarding a resumption of Russian gas purchases from 2020.

Copies of the official proposal were sent to Ukraine's energy minister Oleksiy Orzhel and the European Commission vice president for energy union Maros Sefcovic, Gazprom said.

Naftogaz has previously said it would only drop the legal claims against Gazprom -- which currently total $22 billion, according to its estimates -- if the Russian company presented incentives equivalent to the same value, suchas those that could result from a lucrative long-term gas transit deal.

Ukraine, which has been aiming to adopt European energy regulations to ensure any new deal with Gazprom complies, has also ruled out extending the current arrangements.

Gazprom, meanwhile, also wants to resume direct sales to what was once one of its biggest markets, and has linked the issue to future transit by saying it would keep part of its network close to Ukraine operational if gas supplies are needed by Ukraine itself.

Kiev, though, has repeatedly ruled out buying gas directly from Gazprom, saying it could never be depended on as a reliable supplier.

Ukraine transited some 87 Bcm of Russian gas to Europe in 2018, but those volumes are set to slump once the planned Nord Stream 2 and TurkStream gas pipelines come online.

In the first 10 months of this year, Ukraine transited 73.3 Bcm of Russian gas to Europe, or around 45% of total Russian sales in Europe and Turkey, according to data from UkrTransGaz.

-- Stuart Elliott, Stuart.Elliott@spglobal.com

-- Edited by Jonathan Fox, jonathan.fox@spglobal.com