Gazprom to Supply Ukraine with 55bcm Gas Next Year

Gazprom said on Tuesday it has agreed to supply Ukraine with a minimum 55 billion cubic metres of Russian gas next year and that prices would be agreed in the near future as the two sides seek to avoid a new supply dispute.

Gazprom, Russia's gas export monopoly, said in a statement "significant progress" was made during talks in Moscow between its chief executive, Alexei Miller, and the head of Ukrainian state energy company Naftogaz, Oleg Dubina.

"There is a general understanding on gas prices for Ukraine in 2009 and it's expected that negotiations on this subject will be concluded in the near future," Gapzrom said in the statement.

The volumes agreed were in line with Ukraine's current gas imports. The price, however, will be key to avoiding a dispute similar to that which cut off Russian supplies in early 2006, in the process severing a key transit route to the rest of Europe.

Gazprom has long said it wants to switch to market prices with ex-Soviet states and has previously indicated it could significantly increase the price for Ukraine, which at the moment pays $179.50 per 1,000 cubic metres.

Russia agreed, however, to spare its southern neighbour from a shock price rise when Prime Minister Vladimir Putin signed a memorandum on Oct. 2 with his Ukrainian counterpart, Yulia Tymoshenko.

Gazprom said on Tuesday the agreement paved the way for a long-term supply agreement from Jan. 1, 2009 with the switch to market prices being phased in over a three-year period.

Russian gas prices for Europe were at record highs of over $500 per 1,000 cubic metres in October, but the 60 percent drop in crude oil prices since July peaks could spur lower gas prices.

Gazprom's gas prices to Turkey could fall 20 percent in 2009 if oil prices remain at current levels of about $60 a barrel, Sergei Komlev, the head of Gazprom's export arm, said on Tuesday in Istanbul.

Author: Jo Amey