Ukraine’s state gas company Naftogaz said on November 4 it has paid the first tranche of its debt to Russian gas monopoly Gazprom, fulfilling the terms of an EU-brokered deal signed two weeks ago.
“Naftogaz of Ukraine has transferred $1.45 billion to Gazprom following the trilateral agreement signed between Ukraine, Russia and the European Commission last week in Brussels,” Naftogaz said in a statement. “The transfer relates to 11.5 billion cubic metres of gas supplied in November to December 2013 and April to June 2014, priced at $268.5 per 1,000 cubic metres, for which Naftogaz will pay a total of $3.1 billion. The Arbitration Institute of the Stockholm Chamber of Commerce will make a decision on debt settlement between the parties for the period since 2010. The Brussels protocol does not prejudice these Arbitration Institute proceedings. Naftogaz has all necessary funds in place,” the statement read. Russia raised the price it was asking Ukraine pay for gas early this year and stopped supplying gas to Ukraine in June, citing $5.3 billion in debt and demanding advance payment for future supplies. Similar rows in 2006 and 2009 left downstream consumers in Europe without gas supplies for part of the winter season. Europe gets about a quarter of its gas needs met by Russia, though most of that runs through the Soviet-era gas transit network in Ukraine.
The October 30 accord calls for Ukraine to pay $3.1 billion in two tranches by the end of the year.
In return, Russian delivers gas under a pre-payment mechanism that extends through March. The interim contract frees Ukraine from a take-or-pay clause, which would’ve obligated it to pay for set volumes of natural gas regardless of usage. Gas is also delivered to Ukraine at a discounted rate.
Meanwhile, Ukraine is seeking to reduce its reliance on Russian gas by working with its neighbours to reverse the direction of natural gas supply lines and by exploiting domestic shale reserves.
By the Ukrainian government’s estimates, there may be enough natural gas in shale reserve areas to meet the country’s needs without imports.
The government extended the terms for a shale exploration license by five years. JKX Oil and Gas said on November 6 its exploration permit for the Zaplavskoye license was extended through December 2019. The reserve basin surrounds four other areas where the company is working to extract reserves locked in shale. Ukraine is one of the Eastern European countries rich in shale natural gas. JKX said its production in Ukraine for 2013 averaged 9,731 barrels of oil equivalent per day, an 18% increase from the previous year.