Ukraine & Gazprom Go To War Over Gas Prices

Gazprom took a decision yesterday that will raise Ukraine’s gas deficit significantly. The company said it will consider the 7.8 bln cm of its gas kept in Ukraine’s underground storage facilities, as part of its payments for the transit of gas exports through Ukrainian territory. Ukraine’s Naftogaz has an agreement with Gazprom, according to which the latter pays for gas transit via gas deliveries. The implied gas price is USD 50 per 1,000 cm and the implied transit tariff charged by Ukraine is USD 1.09 per 1,000 cm per 100 km. Concorde Capital: Gazprom’s decision to treat gas in Ukraine’s storage units as gas transit payments, will increase Ukraine?s gas deficit significantly. The deficit is now estimated at over 10 bln cm. Gazprom said it is ready to make up the shortfall by selling gas to Naftogaz at a market price of USD 160 per 1,000 cm, which is unacceptable for Ukraine. Ukraine regards Gazprom’s decision as a violation of the previous agreement. It is unclear at the moment how the two parties will resolve the conflict, but no matter what the decision, the outcome will likely be higher natural gas prices.Currently, 85% of Gazprom?s exports to Europe pass through Ukraine.