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31.07.04á06:44
A TRIPLE KNOT
RUSSIA AND UKRAINE AGREE ON CHANGING TURKMEN NATURAL GAS PURCHASES AND TRANSIT SCHEME STARTING JANUARY 1, 2005

Strategic agreements reached by Gasprom and Naftogaz of Ukraine, blessed by Vladimir Putin and Leonid Kuchma four days ago in Yalta, were put on paper yesterday. As it came out, a new company will be set up in Switzerland as a result of negotiations of the presidents of Russia and Ukraine. Heads of the two state monopolies Alexey Miller and Yuri Boyko signed a set of documents identifying terms and conditions of the two states' cooperation in natural gas supplies and transit up to 2028. Under the documents signed, the new company, RosUkrEnergo, will purchase Turkmen gas for the Ukrainian market, operate the transit of the gas and invest in the development of transport infrastructure necessary to ensure transit. 100% subsidiaries of the Gasprombank and Austria's Raiffeisenbank will be 50-50 shareholders of the company, with Naftogaz of Ukraine acting only as a consumer of gas under the new scheme.

As "Vremya novostey" expected (the issue of July 27), Miller's cloudy references that he made after the Yalta meeting were about Turkmen gas that Gasprom contracted earlier. It should be recalled that Russia and Turkmenistan signed a 25-year agreement in April, providing for purchases of 60-80 bcm of gas by Gasexport starting 2007, i.e. all the amount that might be exported vie the Russian territory. At the same time, Ukraine, purchasing almost half of its domestic consumption - 36 bcm of gas a year - from Ashgabat, has a contract expiring in 2006 whose prolongation seemed unrealistic after a deal with Russia was signed (Leonid Kuchma's unrealized visit to Turkmenistan is proof of that). Kiev had to make agreements with Gasprom resulting in redesigning of the scheme of Turkmen gas deliveries to Ukraine. Hungarian offshore Eural Trans Gas, authorized by the Ukrainian side to take up functions of the operator and beneficiary of Turkmen gas a year and a half back, was replaced by a new structure - RosUkrEnergo - that will be controlled by Gasprom and its new partner Raiffeisenbank. And Naftogaz of Ukraine is forced to content with a role of observer.

RosUkrEnergo will launch its activities starting 1 January 2005 and will carry out transit of gas instead of Eural Trans Gas that Naftogaz of Ukraine purchases under the existing contract. According to information received by "Vremya novostey", the terms will remain the same as with the Hungarian agent. The company will get 13 bcm of gas as payment for services. Part of this gas will be sold at a higher price to the Ukrainian concern and 3-5 bcm will be exported to Eastern Europe within Gasexport's portfolio. Besides, RosUkrEnergo will purchase gas that Gasprom already purchases from Turkmenistan. The amount will increase to 8 bcm of gas next year and to 10 bcm in 2006. Starting 2007 it will reach 60 bcm and will be purchased by Gasprom alone. At the same time, a two-fold increase in Turkmen gas supplies to Ukraine will not occur due to an increase in consumer demand in this country but due to phasing out of barter in payment for Russian gas transit via Ukraine.

Some 85% of Gasprom's exports (around 110 bcm of gas per year) to Europe pass through the Ukrainian gas transportation system. This year it will cost Gasprom about 23 bcm of gas (90% of payment) and $130 mln. However, the concern has long wished to get rid of barter in payment for transit. Therefore, the volume of barter will have to fall to 15 bcm in 2005. According to officials, Gasprom is going to export the made-available volumes of its own resources.

According to Gasprom's representative, Austira's bank holding shares in RosUkrEnergo is needed to attract financing to develop the infrastructure for exports of Turkmen gas. Raiffeisenbank Investments AG's (a subsidiary of the bank) spokesman Wolfgang Puchek said in an interview to "Vremya novostey" that the agreement is rather of general and non-binding nature for his company. At the same time he assured that one of the strategic tasks is to ensure financing of infrastructure projects in Central Asia. The feasibility study of a project, providing for reconstruction of a system with a potential capacity of 50 bcm a year and construction of a new pipeline with a capacity of 30 bcm from Turkmenistan to the western border of Ukraine, will be ready this autumn. But what is for sure now is that Uzbekistan and Russia alone will need some $2 bln in capital investments that the joint venture will have to secure from its own profits and outside funds provided by share-holding banks.

Yet, estimates of profitability of RosUkrEnergo prove that it may well do without large-scale borrowings. According to various estimations, Eural Trans Gas's profits stand at $300 to $700 mln. Evidently, earnings of the new company, considering big amounts of gas, will exceed $500-900 mln. And this is despite the fact that it will completely depend on Gasprom's desire to let RosUkrEnergo have access to mega profits from export and thus, can be easily influenced according to the tasks of the day.

Gasprom, however, should not feel relaxed. There remain a number of strategic issues in relations with Ukraine that are currently suspended. These are both long-term agreements on Russian gas transit and settlement of Kiev's old debt to Gasprom amounting to $1,6 bln and, of course, functioning of a gas transportation consortium, without which yesterday's success doesn't look absolute.

Alexey GRIVACH

"VREMYA NOVOSTEY", 30.07.2004

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