Europe calls upon Ukraine to cancel Naftogaz market preferences

The Energy Community’s Secretariat has called for the immediate cancellation of the Ukrainian government decree that granted exclusivity to state enterprise Naftogaz in supplying natural gas to the nation’s 168 biggest consumers this winter, according to its Dec. 11 statement. The decree is non-compliant with the Energy Community Treaty and the Ukraine-EU Association Agreement and is “harming the reputation that Ukraine gained as a reliable partner in gas transit,” according to the Secretariat.

Recall, the Secretariat of the Energy Community sent a letter to Ukrainian Prime Minister Arseniy Yatsenyuk on Nov. 14 requesting an explanation for his Cabinet’s decision granting exclusivity to Naftogaz. Before that, in resolutions issued on Nov. 7 and 11, the Cabinet granted exclusivity to Naftogaz in supplying gas to the 90 biggest consumers in Ukraine. On Nov. 26, the Cabinet canceled the previous decrees to issue a stricter one, with a list of 168 consumers.

Alexander Paraschiy: The government’s restrictions on the gas market not only violate Ukraine’s international commitments with its European partners, but also threaten the nation’s energy security as they demotivate gas producers. In particular, the measures harmed the business of small gas producers, some of which lost a significant part of their client base. Since Nov. 26, the most liquid Ukraine-exposed gas producers, Serinus Energy (SEN PW) and JKX Oil & Gas (JKX LN), lost 27% and 50% of their market capitalization, respectively.

We see little chance that Ukraine’s Cabinet will respond to the Secretariat’s demand, given that its previous warnings offered no results.