Ministry of Economy Sees Gas Price Increase of 7.5% In 2008

Yesterday the Minister of Economy, Anatoly Kinakh, said to journalists that his ministry expects next year’s price of imported gas to increase 7.5% yoy to around USD 140/tcm from the current USD 130/tcm. Vladimir Nesterenko: The news sounds quite positive as we expected gas price at the border to reach USD 160/tcm next year. A gas price $10 higher at the border implies that the price for industrial consumers will increase from the current USD 160-165/tcm to USD 170-175/tcm ex-VAT (provided the supplier keeps its margin fixed). However, we believe that the government’s forecasts could be skewed toward an optimistic scenario, and USD 160/tcm at the border remains a more realistic estimate.