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UKRAYINSKA PRAVDA: YANUKOVYCH TIGHTENS SCREWS IN THE GAS MARKET
Ordinary Ukrainian citizens will have to pay for gas initiatives of the government.
The gas price of $130 offered by ‘fraternal’ Gazprom and RosUkrEnergo made Yanukovych’s government ‘tighten screws’ in the domestic gas market. This procedure took the form of a governmental decree issued last Friday.
Experts who have got the chance to study it generally agree that these innovations will benefit Naftogaz and UkrGazEnergo as well as promote discipline in the national gas market.
However, it would not be Yanukovych’s government if it did not enlarge the document with some lobbyist provisions that will complicate lives of disobedient city mayors and disgraced East-Ukrainian regional gas companies controlled by Privat Group.
Here are the amendments to the governmental resolution dated December 27, 2001:
Naftogaz Ukrayiny is the only authorized company to distribute gas yielded in Ukraine and set its domestic price.
Direct supplies to the customer are possible in case the latter has an operating contract with the owner of the recourse, otherwise gas supplies will be cut off. At that the resolution sets the procedure of recovering debts for natural gas in case the enterprise turns bankrupt;
Customers conclude a united agreement for supplies and transportation of gas with the owner of recourse (previously two separate agreements with seller and gas-supply company were required).
Who bought natural gas?
Let’s recall active investigation initiated by socialist Andriy Derkach last fall when it turned out that 4 billion cubic meters of Ukrainian gas was not supplied to the population, having appeared in the private companies and sold to industrial enterprises for higher prices.
As a result, Naftogaz had to import natural gas which was one of the main reasons for its unsatisfactory economic performance in 2006.
Later on, at the height of a corporate war for semi-state owned Ukrnafta between the government and Privat Group it came up to open informational attacks, specifying volumes, prices and customers for Ukrainian gas. It turned out that natural gas was sold through the auction system of Ukrnafta to traders like EnergoAlliance and Indeco to be further sold to enterprises owned or controlled by Privat Group. There were some exceptions, though.
These exceptions included some enterprises owned by former high ranked officials, the ill famed Itera and other traders.
The new Cabinet did not particularly like welfare or certain business groups that took advantage of Ukrainian gas deposits. Viktor Yanukovych roughly criticized position taken by Ukrnafta. Private companies even offered the government to sign Memorandum on Understanding.
The government managed to settle the conflict heated up by refusal of Ukrnafta to sell gas to Privat-owned enterprises. It is quite possible that the abovementioned document is a kind of a compromise between the government and Ukrnafta (one of the largest extracting companies yielding over 3 billion cubic meters of natural gas a year). Probably this resolution has not caused yet violent reaction of Privat-owned newsmakers.
One customer – one supplier
The new system of gas supplies may cause even greater discontent because of the two factors: compulsory supply agreement and the fact that from now on this agreement is concluded exceptionally between the owner of resource and the customer.
“Previously, a customer had separate purchase and supply agreements, i.e. in fact he bought gas at Ukraine’s border and concluded a separate agreement for its transportation,” explains Mr. Ivan Poltavets, Economist of Bureau for Economic and Social Technologies.
According to Mr. Poltavets, it enabled the customer to constantly arrange legal collisions, avoiding responsibility for late payment. The scheme is quite simple: the owner of resource threatens to cut off gas supplies in case the customer does not liquidate debts. An unconscientious customer applies to the local court which adopts a decision prohibiting gas-transport enterprise to cut off gas supplies. For the next several months the customer consumes gas but the owner of recourse cannot prevent such unauthorized consumption.
According to Mr. Poltavets, it was a common practice during this heating season.
“Of course, a common contract for sale and transportation of gas and legal grounds for gas cuts-off will substantially raise responsibility,” marks Mr. Poltavets.
The expert hints that the government had no other choice, taking into account price advance for Russian gas and numerous loopholes in legislation.
“During 2006 only enterprises of Teplocomunenergo owed Gaz Ukrayiny over UAH 1.2 million. Keeping the current contract system could have resulted in financial collapse of Naftogaz in the near future.” At the same time Poltavets reminds that the same system was in action during 2001-2006 which simplified accounts for natural gas and raised financial responsibility of the customers.
However, there is the reverse side of the resolution. According to the governmental resolution Naftogaz substantially changes distribution of financial resources in its favor.
“Transition to a united contract means that the owner of recourse, i.e. Naftogaz accumulates financial recourses coming from the customers. After that Naftogaz pays for gas transportation to gas-transportation regional plants,” Vice President of the Centre for Studies of Corporate Relations Mr. Rostyslav Tyshchenko comments on the changes.
Naftogaz still remembers a last year corporate conflict with some western regional gas plants.
In response to possible termination of supply agreement regional plants held up payments for the supplied natural gas.
“A united contract enables Naftogaz to control financial flows in regional gas-distribution companies and to put end to corrupt schemes and unaccountable losses of gas during its transportation. In fact, it is now one of the main income items for private gas companies and management loyal to them. Of course, some people will not like that, so severe criticism will be quite expected,” states Mr. Ishchenko.
However, according to the expert, investors of privatized gas companies may lay quite reasonable claims to the government. For instance, structures of Mr. Viktor Weschelberg which bought 5 regional gas companies in Ukraine are not likely to gain surplus profits.
Not without Mr. Firtash
Mr. Ivan Poltavets draws attention to the fact that ALL gas companies will have to switch to a united contract. So, UkrGazEnergo, partially owned by a famous businessman Mr. Dmytro Firtash and Russian Gazprom, will also have to conclude united contracts with their customers.
Experts hesitate to comment how the resolution gave benefits not only to Naftogaz but also to UkrGazEnergo. According to Economichna Pravda sources, the resolution was to be issued before the New Year, but because of the numerous disputes it happened last Friday.
“The fact that the resolution set equal rules of play for all owners of gas recourses, including UkrGazEnergo, is quite logical and complies with European norms of operations in the national gas markets. However, there is a more important detail here. At a first sight UkrGazEnergo does not get any visible financial privileges. But the absence of cash deficiency in relations with Ukrtransgaz enables the company to save up and not to take additional credits. That’s why I do not rule out the possibility that the resolution was lobbied not only by Naftogaz but also by UkrGazEnergo,” notes Mr. Ishchenko.
In general, admitting that the innovation will face an avalanche criticism of some gas companies and of course from customers, experts claim that the adopted amendments will promote a better financial performance of Naftogaz and raise responsibility for timely payments, given sharp advances of price for natural gas.
On the other hand, the resolution may be considered as a simple shift of responsibility from the state monopoly to local authorities that may face gas cuts-off and at the same time will have ordinary citizens cover underpayments for the supplied natural gas.
Ihor LUTSENKO
“Ukrayinska Pravda”, January 26, 2007
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