Archive for June 10th, 2010


Further Gas Liabilities

June 10, 2010

The Arbitration Institute of the Stockholm Chamber of Commerce on June 8 obliged the national joint stock company Naftogaz Ukraine to return 11 billion cubic meters of gas to Switzerland-registered RosUkrEnergo (RUE) and to give it 1.1 billion cubic meters of gas as compensation, according to the Centragas company, which is a shareholder of RosUkrEnergo.

“This ruling confirms that the gas in question was taken by Naftogas in breach of its storage contract with RUE, and that Naftogas will return 11 billion cubic meters of gas in storage in Ukraine to RUE on the same terms as before the expropriation,” the press release of Centragas reads.

This ruling followed an earlier decision issued by the Stockholm arbitration court on March 30 2010 obliging Naftogas Ukrainy to pay RUE around $200 million as a penalty for various breaches of supply, transit and storage contracts.

This earlier ruling also becomes enforceable and will therefore be paid to RUE as part of this new decision, the press release reads.

As reported earlier, the Arbitration Institute of the Stockholm Chamber of Commerce is considering disputes between Naftogaz and RosUkrEnergo, which were merged into one case on August 28, 2009.

RosUkrEnergo was set up in the summer of 2004 by Gazprom and Centragas Holding AG on parity beginnings. Centragas Holding is owned by Ukrainian businessmen Dmytro Firtash (90%) and Ivan Fursin (10%). RosUkrEnergo was the monopoly gas-supplier to Ukraine in 2006-2008.

Now dear readers, considering the price gas when the gas was bought and when Ms Tymoshenko removed RosUkr from the equasion (and kept its assets), todays  gas price is vastly cheaper so this is going to cost Ukraine a fortune…….as simply giving the gas back and saying sell it on the market will not cover the costs of original purchase……hence the additional 1.1 billion cubic meters of gas.

In fact Ms Tymoshenko is on record as stating “claims against the Ukrainian government were incorrect, as neither the Cabinet of Ministers nor Naftogaz had agreements with that company.”  Unfortunately, it seems in a court she cannot buy or influence, a very different conclusion has been made based on…….agreements and contracts no less!

12.1 billion cubic meters of gas… expensive!

Still, as foreign investors are concerned it is a positive sign that, as long as you have a foreign court of arbitration named in the contract, your risks here deminish…….and to be honest, most Ukrainians state a foreign court of arbitration in their contracts…….in case you know someone in government!

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