Naftogaz demands in Stockholm court revision of transit rate for Gazprom

Naftogaz of Ukraine submitted to the Stockholm
arbitration court a claim to revise its transit contract with Gazprom (GAZP RX)
as of March 2018, the company reported on July 6. Naftogaz submitted its
request to revise its transit charge against Gazprom in March 2018, referring
to “significant changes in the European gas market” after the contract was
concluded in January 2009, and “the fact that the tariff level does not
correspond to the European level.” Gazprom “has not been constructive in the
negotiations, compelling Naftogaz to refer the matter to arbitration as
provided for in the contract,” the company commented. Naftogaz estimates the
value of its claim at USD 11.58 bln (which is the difference between new
transit tariff – calculated based on contract with Gazprom – and the existing
one, multiplied by the expected amount of gas transit from March 2018 to
end-2019 as stipulated by the contract, or about 207 bcm). 

Recall, the previous litigation between Naftogaz and
Gazprom in Stockholm arbitration court led to net gain of Naftogaz in the amount of USD 2.56 bln.
While those rulings denied Naftogaz the ability to revise gas transit rates for
Gazprom retrospectively, Naftogaz reportedly gained the right to review rates
for the future.

Alexander Paraschiy: The new litigation will likely continue for a couple of years, thus
having no tangible effect on Naftogaz fundamentals in the short term. At the
same time, given Naftogaz’s recent string of successes in its court battles
with Gazprom, such an initiative could increase Naftogaz’s value in the
mid-term. Meanwhile, now it’s more important for the Ukrainian company to secure
Gazprom payments under the completed Stockholm litigation.