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Naftogaz to push forward with Gazprom legal claims despite transit warning

Naftogaz to push forward with Gazprom legal claims despite transit warning Naftogaz to push forward with Gazprom legal claims despite transit warning

Kiev, November 14 - Neftegaz.RU. Ukraine's Naftogaz is to push forward with existing and new legal action against Gazprom despite the Russia's state-controlled company's unwavering stance that it cannot sign a new transit deal with Kiev unless all outstanding legal cases are dropped, Platts reported.

Naftogaz CEO Andrey Kobolev said its legal claims against Gazprom currently total $22 billion, which represent important leverage for Ukraine in negotiating new transit arrangements with the Russian company from 2020.

The claims include the enforcement of a $6.7 billion antitrust fine against the Russian company and its net $2.56 billion arbitration win from February 2018, as well as a new arbitration claim seeking $12 billion in compensation from Gazprom for its refusal to accept market-based gas transit tariffs in 2018 and 2019.

Kobolev said it would only drop the claims if Gazprom presented $22 billion in incentives, such as those resulting from a lucrative long-term gas transit deal. In comments on Facebook, Kobolev said Naftogaz would continue to fight to win what was owed by Gazprom. "As practice shows, this is a very effective tool to protect the interests of Ukraine," he said.

Gazprom warning
The comments come after Gazprom specifically urged Naftogaz to drop all outstanding legal cases against the Russian company if it is to sign a new gas transit deal before the end of the year.

Gazprom itself filed $6 billion in new claims against Naftogaz in July for "unfair" transit contract obligations and has appealed against the arbitration ruling as well as for the 2009 gas supply and transit deal to becanceled altogether.

A major part of the $12 billion claim is Naftogaz seeking to recover impairment and depreciation costs of the gas transportation system. If the Ukrainian transit route were to not be used from 2020, its depreciation costs wouldneeded to have been consolidated much sooner than if it were to be used further into the long-term.

However, should Gazprom sign a new gas transit deal, the $12 billion claim could become redundant as the network would retain its value for longer. The current 10-year agreement between Gazprom and Naftogaz expires at the end of 2019, and there is concern that without a new deal to take effect from January 1, Russian gas transit via Ukraine to Europe could be disrupted.

Vitaliy Radchenko, head of energy at global law firm CMS's Ukraine office, told Platts the arbitration awards were the only concrete leverage that was left for Naftogaz after Gazprom won a permit to build Nord Stream 2 in Danish waters in late October.

A long delay to the construction of the 55 Bcm/year pipeline would have meant Gazprom having to rely on Ukrainian transit for a much longer period. He said he sees the 2 sides remaining far apart in terms of agreeing a new transit deal. "'No-deal' looks more and more likely now," Radchenko said, adding he would not rule out disruption that could last several weeks.

The latest round of talks between the EU, Russia and Ukraine to discuss the terms of future Russian gas transitvia Ukraine to Europe held on October 28 in Brussels ended in deadlock.

Increased storage
Countries in Eastern Europe have been stockpiling additional gas to mitigate the impact of potential disruptionfrom January 1 if Gazprom and Naftogaz are unable to reach a deal.

Sites have been filled almost to capacity in countries such as Hungary, Poland, Slovakia and the Czech Republic. Ukraine itself built its gas stocks to 21.7 Bcm ahead of the start of the high-demand season, with withdrawals having begun on November 1. Kobolev said the high level of gas stocks across Europe would help avoid shortages in the event of disruption to Russian transit.

Ukraine transited some 87 Bcm of Russian gas to Europe in 2018, but those volumes are set to slump once the planned Nord Stream 2 and TurkStream gas pipelines come online.

Author: Stuart Elliott