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    Gazprom, Naftogaz Reach Transit Agreement (Update)

Summary

The agreements involve the unbundled gas transporter which now has guaranteed income for the coming five years.

by: NGW Staff

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Gazprom, Naftogaz Reach Transit Agreement (Update)

(Adds details, quotations)

Russian natural gas will continue to transit through Ukraine to the end of 2024 according to last-minute documents signed by Gazprom, the newly-formed Gas Transmission System Operator of Ukraine (GTSOU)  and Naftogaz late December 30.

In a press announcement after five days' negotiations, Naftogaz said that it, OGTSU and Gazprom, had signed a set of agreements to continue Russian gas transit through Ukraine.

The news comes with the clock timing on the previous gas transit agreement which was set to expire at midnight on December 31.

Naftogaz outlined that three agreements were signed that fulfilled the protocol of 19-20 December meeting in Berlin in Minsk, detailing:

  -  An interconnection agreement between GTSOU and Gazprom establishing technical procedures and rules for cooperation between the operators of the adjacent networks;
  -  An agreement on organization of transit between Naftogaz and Gazprom setting conditions and transit volumes for the next five years; and
 -   A settlement agreement between Naftogaz and Gazprom according to which both parties abandon mutual claims under the 2009 contracts. Minimal transit volumes will be 65bn m³ for 2020 and 40bn m³/year for 2021-2024.

Naftogaz and Gazprom agreed to withdraw from all arbitration proceedings where final decisions have not been rendered yet and to the lifting of legal attachments from Gazprom’s property, assets and monetary funds. The parties also agreed to the halt of any future claims and proceedings under contracts signed in January 2009.

Gazprom CEO Alexei Miller said the set of agreements "represent a major package deal that has restored the balance between the interests of the parties. These documents are coming into effect today, ensuring the transit of Russian gas across Ukraine after December 31, 2019. Gazprom has done everything in its power, once again proving its reputation as a responsible supplier and a reliable partner.”

Naftogaz said that the agreements did not affect Naftogaz Group’s claims against the Russian Federation regarding assets seized in Crimea.

On 27 December 2019, Naftogaz announced that it had received $2.918 bn from Gazprom. under the Stockholm Arbitration Awards of December 2017 and February 2018.

The issue of gas supply was not subject to the package agreements. Naftogaz noted Gazprom's interest in resuming gas supply to Ukraine in future with the pricing based on the NCG price.

The package deal also does not affect Naftogaz Group's claims against the Russian Federation regarding the assets seized in Crimea.

Naftogaz said the agreements will provide Ukraine with guaranteed revenues from gas transit over the next five years, the figure however not yet revealed. "The certainty of future gas transit creates a necessary environment for continuation of the domestic gas market and broader energy reforms, secures gas transmission jobs and future contracts with Ukrainian industrial producers related to the maintenance of the Ukrainian gas transmission system," it said.

CEO Andriy Kobolev said an independent operator would be responsible for the transit which would not operate at a loss, he said. "We have demonstrated Ukraine's reliablility as a transit partner for the EU. Our team is grateful to the European Commission for its consistent position and certifying that the Ukrainian GTS is reliable and efficiently managed. We are also grateful to the US for their firm support of energy security in Europe," he said.

US involvement in EU energy affairs has not been welcomed in countries that will depend heavily on gas in the coming years, such as Germany, whose government sees sanctions as interference. Imposed earlier this month, they forced Swiss Allseas to halt activities on Nord Stream 2.