Gazprom and Naftogaz Switch to New JVs to Settle Gas Issue

According to Interfax, Russian Gazprom and Naftogaz of Ukraine agreed to establish two new 50/50 joint ventures at their meeting in Moscow. One will replace RosUkrEnergo (an importer of natural gas from Russia). The other company will distribute gas to consumers in Ukraine, replacing Ukrgaz-Energo, a JV formed by RUE and Naftogaz in 2006. Gazprom’s chairman, Alexei Miller, said that on Thursday Ukraine will start repaying its debt. Naftogaz Chairman Oleh Dubina confirmed that both parties reached an agreement and said that negotiations will continue on Thursday. He also noted that the gas imported over November-December 2007 will cost Ukraine USD 130/tcm. Vladimir Nesterenko: The news falls in line with our general expectation that the scheme of gas supplies will only change if the Ukrainian party offers a reasonable alternative. Gazprom retains its 50% interest in earnings from transit to Ukraine’s border, while its share in marketing is now improved from 25% (50% in RUE x RUE’s 50% stake in Ukrgaz-Energo) to 50% directly. In its turn, Naftogaz gained a 50% interest in transit, which was previously owned by private shareholders. We expect that the next step will be to reinforce this arrangement with intergovernmental accords, which are now feasible due to the absence of private parties.