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Gazprom, Naftogaz, lobby for consortium

Gazprom, Naftogaz, lobby for consortium
Alexey Miller, Chief Executive of Russian state controlled company Gazprom, arrives at an international meeting on the European gas crisis in Moscow on January 17, 2009. The conference at the Kremlin failed to bring an agreement to restore supplies of Russian natural gas via Ukraine. (UPI Photo/Anatoli Zhdanov) | License Photo

KIEV, Ukraine, Sept. 27 (UPI) -- Russian energy giant Gazprom and Ukraine's national gas company Naftogaz want the government in Kiev to change legislation to free the way for a Russian-Ukrainian pipeline consortium.

The amendments to Ukrainian law should enable foreign companies to manage Ukraine's pipeline system and pave the way for a future-oriented consortium between Gazprom and Naftogaz, Anatoly Podmyshalsky, who oversees Gazprom's business in former Soviet republics, said at a conference in Kiev, Russian news agency Interfax reports.

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"It would be possible to sit down and determine, in a concerned manner, the amount of gas to transport over a significant time in the future," Interfax quoted Podmyshalsky as saying.

The manager added that a joint management of the pipeline system would give Gazprom a better insight into which sections of the pipeline need to be modernized, can be left as they are, or should be scrapped altogether.

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The Ukrainian grid moves nearly 80 percent of Russian gas exports to Europe, satisfying one-fifth of the continent's demand. However, the Soviet-era grid is in dire need of modernization and Kiev hardly has the money to do it alone.

Ukraine's President Viktor Yanukovych is much more open toward a gas consortium involving Russia than his predecessor Viktor Yushchenko, who rowed heavily with the Kremlin.

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During Yushchenko's time in office, gas conflicts between Russia and Ukraine temporarily halted supplies to Europe, damaging Kiev's reputation as a reliable transit country.

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Moscow has since launched two pipelines -- Nord Stream and South Stream -- that bypass Ukraine, which is concerned that it might lose its position as the dominant energy transit country to Europe.

Yanukovych has in the past indicated that a consortium comprised of Naftogaz, Western companies and Russian energy giant Gazprom could take over the Ukrainian grid. He has also tried to convince Russia to drop South Stream, intended to move 2.2 trillion cubic feet of gas per year from Russia under the Black Sea to Bulgaria and then on to Western Europe.

Gazprom is in a great negotiating position as it has control over how much Ukraine's state-owned utility Naftogaz has to pay for Russian gas -- a small gas bill from Russia is key to Ukraine's economic recovery.

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Gazprom has formulated an interest in taking over Naftogaz in return for cheaper gas but it's unlikely that Ukraine's parliamentarians would agree to such a deal -- so a consortium with equal or similar responsibilities seems to be the only option on the table.

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