Turkmenistan Raises Gas Prices for Gazprom

According to Gazprom, its delegation has agreed with Turkmenistan to lift the price for natural gas to USD 130/tcm in 1H08 and USD 150/tcm in 2H08. Starting in 2009 the price will be calculated according to a formula based on market prices. Vladimir Nesterenko: We believe that the repricing of Turkmen gas for Gazprom signals higher loyalty of the Russian gas monopoly toward Turkmenistan, which looks reasonable given increasing openness of the new Turkmen leader to the western world. We update our forecast of the gas price at the Ukrainian border, now assuming a narrower range for 2008: from USD 170/tcm in the best case scenario to USD 190/tcm. Importantly, the net-back pricing for Turkmen gas effective from 2009 will mean generally the same principle for Ukraine. European price growth to USD 300/tcm by 2009 will mean at least a USD 250/tcm net-back price for Ukraine.