Ukraine to import all gas from Central Asia in 2007

Ukraine to import all gas from Central Asia in 2007

London (Platts)--4Oct2006

Ukraine will start importing natural gas exclusively from three Central
Asian countries, and nothing from Russia, in 2007, Ukrainian Energy and Fuel
Minister Yuriy Boyko said late Tuesday.
The former Soviet states of Uzbekistan, Kazakhstan and Turkmenistan will
supply a total of some 57.5 billion cu m in 2007, a departure from this year's
arrangement that sees gas delivered from Russia and Turkmenistan.
"We have already signed contracts on gas supplies to Ukraine," Boyko said
in an interview with Channel 5 television. "Our country will be getting gas
from three Central Asian nations."
Uzbekistan is expected to supply 7 Bcm of gas to Ukraine in 2007,
Kazakhstan will deliver 8.5 Bcm and Turkmenistan will supply the balance of 42
Bcm, Boyko said.
RosUkrEnergo, a Swiss-based gas trader co-owned by Russian gas giant
Gazprom and two Ukrainian businessmen, will coordinate the supply of the
Central Asian gas to Ukraine.
Gazprom won't be penalized by the new arrangement--it will be free to
sell its own gas to more lucrative markets in western Europe, while at the
same time taking half the profits from RosUkrEnergo's operations.
RosUkrEnergo was earlier this year named by the Ukrainian government as
the exclusive gas supplier to Ukraine until the end of 2010.
It is the first time that Ukraine will be importing such large volumes of
gas supplies from Uzbekistan and Kazakhstan underscoring these Central Asian
nations' rising gas production.

RESELLING TURKMEN GAS
Boyko recently completed gas talks with Russia over extra gas supplies to
Ukraine in the fourth quarter, needed to meet an 8 Bcm shortfall in demand, at
$95/1,000 cu m, the same price as for the whole of 2006.
Gazprom will supply the volumes to Ukraine using Turkmen gas having
agreed to buy it at $100/1,000 cu m starting from October 1. RosUkrEnergo will
sell to Ukraine through the end of the year at $95/1000 cu m.
Analysts said the deal most likely included a secret compensation from
Ukraine to RosUkrEnergo, which would otherwise be suffering huge losses under
this arrangement.
Last week, Boyko said Ukraine would import 55 Bcm of gas in 2007. He also
added that gas supply prices would be agreed in talks with Gazprom by the end
of the year.

FROM GAS PRODUCTION TO TRANSIT
The latest comments from Boyko indicate that Russia, once the only
supplier of gas to Ukraine, will now only act as a transit country delivering
Central Asian gas to Ukraine via its pipelines.
Boyko dismissed concerns that gas supplies may be disrupted or delayed
next year. "The level of our strategic partnership anticipates that Russia
will be rendering services in a way that the Central Asian gas will be
delivered in full volume and on time," Boyko said.
In turn, Ukraine is the main transit country for Russian gas exports to
Europe, as it ships more than 120 Bcm of gas annually via its gas pipelines.
--Alexander Bor, newsdesk@platts.com

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