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Kremlin offers gas at $180 – Ukraine signs a deal with Engie (France)

October 28, 2016

Following President Putin’s very predictable monologue at the Valdai gathering, that day he also made a statement regarding Russian gas prices for Ukraine, should Ukraine decide to buy Russian gas once again.

Nowadays, the price of Ukraine won’t be higher than that for the neighboring states, namely for Poland. I’m not aware of actual prices, but at the moment of our conversation with Ukrainian President Petro Poroshenko, Poland was buying gas at $184-185 per 1,000 cubic meters on contractual terms. We could sell [gas] to Ukraine at $180. I named the price – $180 per 1,000 cubic meters.

We have discussed the issue of gas shipments to Ukraine with the president of Ukraine at his initiative. He asked whether Russia could resume the shipments. Certainly, it could, at any second. Nothing additional is needed – we’ve got a contract and an addenda to it. The only thing required is prepayment.

As far as I know, the price of gas for the ultimate industrial consumer in Ukraine already exceeds $300 per 1,000 cubic meters. We offer a price of $180, but they don’t want to buy from us yet.

Let it be – let them work. The main thing is that they could ensure transit supplies to European countries.

(He also commented upon the “illegalities” of Ukraine buying from western sources “which is a violation of a contract between Gazprom and its western counteragents” and to which Russia “had turned a blind eye.” and inferred to a return of  dubious”middle men” between Ukraine and western suppliers.)

 

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At the same time, Prime Minister Groisman was in France.

During this visit a deal was signed with French energy company Engie regarding supply and the reservation of transport and underground storage facilities operated by UkrTransGaz in Ukraine – the deal commencing this winter.

Since mid-2015 Engie has become a major supplier of gas to Ukraine, predominantly via Naftogaz, delivering approximately 3.5 billion cubic meters of gas.  Indeed Engie intends to open a subsidiary in Ukraine.

Thus far, despite quite significant legislative changes in the Ukrainian energy sector to bring it toward EU Third Energy Package compliance and Association Agreement obligations, the Ukrainian energy market has remained impenetrable to external market players.

The proposed privatisation of Centroenergo in 2017, whilst certainly of interest to dubious Ukrainians such as Igor Kononenko (who seems to be filling key positions within the company with “his people”), presents the best and swiftest opportunity for the energy market to receive a competent foreign entrant assuming control and ownership of assets and production in Ukraine – which will cause waves in the corrupt and opaque trough of Ukrainian energy from which no self-respecting oligarch fails to drink one way or another.

Clearly the Engie subsidiary, unless it becomes more than an “on-site” import management entity requires little investment and negligible risk – unlike the purchase of Centroenergo.

Nevertheless, there is a certain degree of symbolism to the French Engie opening a subsidiary in Ukraine which a reader can expect will be embellished for the purposes of political expediency.  Much more to the point however, is a clear move in the direction of a consolidated and irreversible diversification of energy supply for Ukraine.

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