Ukraine to Review Natural Gas Transit Agreements with Gazprom

Russia's state monopoly Gazprom is nervously contemplating change is in its transit agreements with Ukraine for delivering its natural gas to Eastern European customers.

Ukrainian Prime Minister Mykola Azarov announced that the Ministry of Fuel and Energy state company NAK Naftogaz Ukrainy, is to be liquidated and all agreements signed in its name will be reviewed.

Azarov told journalists that Ukrainian President Viktor Yanukovych instructed the government to prepare a draft program for reform of NAK Naftogaz Ukrainy by 1 October, stating, "There will be a liquidation period, and a certain time after all necessary formalities are completed, entirely new companies will operate on this market. And in view of this, all agreements that exist today will be reviewed."

In the Ukrainian government restructuring NAK Naftogaz Ukrainy, drilling and transport companies will be separated out from it. Azarov added, "It is entirely obvious that there will be an independent gas drilling company, and an independent company that will deal with transit of gas, and in view of this it is necessary to re-conclude certain agreements, because there will be a new subject of economic management," Gazeta.ru website reported.

In discussing NAK Naftogaz Ukrainy-Gazprom contracts, Azarov observed, "Most regrettably, this agreement from 2004, which has the force of an interstate agreement and stands above intra-national laws, has never once been fulfilled. Therefore, we believe that the contracts that were concluded in 2009 contradict at least that portion that concerns annual volumes of gas deliveries."

By. Charles Kennedy, Deputy Editor OilPrice.com