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Ukraine cuts entry, exit point tariffs on natural gas transportation

Highlights

Move aimed at improving competitiveness

New tariffs come into effect January 1

Kiev — The Ukrainian energy sector regulator moved to cut tariffs charged at natural gas entry and exit points for 2019 to make its gas transportation system more competitive, an official said Monday.

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The system, which competes with Nord Stream and other Russian gas pipelines for alternative gas shipments to Europe, will begin charging new tariffs from January 1.

The tariffs for all entry points will be reduced by 49.6% to $6.28 per 1,000 cubic meters for international shipments, down from $12.47/1,000 cu m, according to the commission.

Since all exit points are at different distances from entry points, they will have different tariffs.

Lower tariffs will help Ukraine to reduce the price of imported gas in the domestic market by about $6/1,000 cu m in the wholesale market, head of the National Commission for State Regulation for Energy and Utilities, Oksana Kryvenko, said.

"The Ukrainian gas transportation system will strengthen its competitiveness as an absolutely more cost-effective alternative to Nord Stream and other bypass gas pipelines," Kryvenko said.

Ukraine, Russia and the European Union are preparing to hold in January 2019 a round of trilateral negotiation over natural gas transit agreement, and Kryvenko said cutting the tariffs will help Ukraine secure a "more beneficial transit contract" with Gazprom after the current contract expires by the end of 2019.

"Ukraine has again proved that it is a reliable and a promising partner," Kryvenko said. "It is necessary to win competition for investments and the workload of the gas transmission system."

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The move comes as Russia, the primary user of the gas transportation system, has been seeking to reduce or even eliminate shipments via Ukraine after gas transit contract expires by end of 2019.

Gazprom does not recognize the entry/exit point tariffs, and is currently paying a tariff that has been agreed upon in the 2009 gas transit agreement: about $2.7 for shipping 1,000 cu m for a distance of 100 km.

The trilateral talks focus on changing that and making Gazprom accept the system of entry-exit tariffs.

Ukraine's efforts to make gas transportation system more competitive come as Russia is building several high-profile gas pipelines such as TurkStream and Nord Stream-2, which would bypass the Ukrainian pipelines.

--Staff, newsdesk@spglobal.com

--Alexander Bor, newsdesk@spglobal.com

--Edited by Dan Lalor, newsdesk@spglobal.com