Firtash Ally Becomes Energy Minister; Donetsk Man Expected to Head Naftogaz.

Yuri Boiko, who in Jan. 2002 to March 2005 headed the state oil and gas company, Naftogaz, has been appointed energy minister in the new government. The newspaper Delo reported that the CEO of Naftogaz will most likely be Volodymyr Sheludchenko, head of Donetskoblgaz. Vladimir Nesterenko: Boiko is regarded by most industry experts as a competent and experienced professional in the oil and gas field. He is expected to restore close cooperation with Russia and Turkmenistan and soften the tensions in Ukraine’s relationships with gas suppliers. Boiko is a supporter of the January 2006 gas agreement with Gazprom and RosUkrEnergo and he was closely involved in the deal that established RosUkrEnergo in 2004. Although it is still unclear what his strategy will be on such sensitive issues as Russia’s drive to obtain a role in managing Ukraine’s gas pipelines, in general we think Boiko will improve the environment for Naftogaz, Ukrnafta (UNAF: HOLD), and especially for oil refineries. However, his appointment also increases the likelihood of renewed import duties for oil products, which could hurt domestic fuel retailers such as Galnaftogaz (GLNG: BUY). Please see our ANB on fuel import duties from June 27.