The Cabinet of Ministers of Ukraine has abolished the monopoly over imported gas sales held by the state gas company Naftogaz of Ukraine, together with its near-monopoly over gas imports. Resolution No. 939, which introduced the change, came into effect on 13 October 2012. It comes as a further step in recent reforms to the domestic natural gas market and the accompanying reorganisation of Naftogaz' business.
Previously, only Naftogaz could import gas for onward supply to Ukrainian gas consumers. The act of importing gas for consumption also severely restricted, with only six chemical producers being authorised to import gas for their own use. Other than these six, all consumers depended on Naftogaz for access to imported gas.
Now any company licensed to sell gas in Ukraine may import it. As a result, licensed independent gas traders may import gas either to meet their own needs, or for resale to other industrial and commercial consumers. This may loosen the control that Naftogaz and its favoured direct buyer, Gazprom's Ukrainian subsidiary, Gazprom Supply Ukraine, enjoyed over the market for gas supplies to industry. Until now, the provisions of a gas import agreement between Naftogaz and Gazprom Supply Ukraine entitled the latter to 25% of the gas imported from Russia, and Naftogaz to the other 75%. These shares may change in light of the change in the law.
Despite this change in the law, the situation with respect to residential gas sales is likely to remain essentially unchanged. "Oblgazes" – the suppliers licensed to supply gas to households at regulated tariffs – will technically benefit from the same freedom to import as independent gas traders. In practice, however, they will continue to purchase domestically produced gas from Naftogaz in order to benefit from the discounted rates it applies to gas sold to households. Indeed, the resolution expressly safeguards the Oblgazes' share of the local gas market, by requiring Naftogaz to supply them with the volumes they require to satisfy residential demand.
Resolution No. 939 "On Amendments to the Cabinet of Ministers of Ukraine Resolution No. 1729 dated 27 December 2001 and the Repeal of Certain Cabinet of Ministers of Ukraine Resolutions" is dated 3 October 2012.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 02/11/2012.