Ukraine seeks to hike 30% tariffs for Russian natural gas shipments to Europe

Kiev (Platts)--12Mar2015/806 am EDT/1206 GMT

Ukraine will seek to hike the gas transportation tariffs it charges Russia for shipments of natural gas to markets in Europe by 30%, Energy and Coal Industry Minister Volodymyr Demchyshyn said late Wednesday.

Ukraine, Russia and the EU will hold trilateral negotiations on March 20 in Brussels to discuss gas supplies and prevent potential disputes between Kiev and Moscow.

Ukraine currently charges the Russian gas giant Gazprom $2.88 to ship of 1,000 cu m of gas 100 km (62 miles) across its territory, but the price is only valid until the end of the month and will have to be renegotiated.

"I set myself the goal of increasing this tariff by at least 30%," Demchyshyn told a press conference.

The price hike is necessary to ensure enough money is raised to upgrade the Ukrainian gas transportation system which currently moves more than a half of Russia's Europe-bound gas supplies.

The transit of Russian gas via Ukraine fell by 38.8% year on year to 7.9 Bcm in January-February, according to the state gas shipper UkrTransGaz.

In February, Ukraine moved 3.7 Bcm of Russian gas to markets in the EU and Moldova, down 32.7% on the year and 11.9% from January.

GAS PRICES

Ukraine expects that Russian natural gas price will drop to "significantly" less than $270/1,000 cu m from April, Demchyshyn said.

"The price on the spot market in Europe has dropped to below $270/1,000 cu m, so we expect that the prices discussed will be significantly below this level," Demchychyn said.

Ukraine increasingly relies on gas imports from Europe after Russia, once its main supplier, completely suspended gas deliveries in June 2014, forcing the country to begin imports of European gas via Slovakia, Poland and Hungary.

Ukraine resumed imports from Russia in December 2014 after a six month-long suspension of supplies caused by a gas price dispute.

In January-February, Ukraine imported about 4.1 Bcm of gas, comprising 2.3 Bcm from Europe and 1.8 Bcm from Russia, while a year earlier, Ukraine imported the same amount, all of it from Russia, according to state-owned gas shipper UkrTransGaz.

--Alexander Bor, newsdesk@platts.com
--Edited by Jonathan Dart, jonathan.dart@platts.com

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