Naftogaz, Gazprom Discussions Still Fail To Yield Agreement
A joint venture between the Russian state-controlled natural gas company Gazprom and Ukraine’s state-owned Naftogaz remains the most likely outcome of the long-running negotiations between the two groups over potential collaboration.
While a straight merger was initially discussed and, in theory, at least remains on the table, this option presents far more problems than it solves, according to industry sources.
A Moscow-based lawyer noted that from the Russian point of view, a merger handing up to 10 percent of Gazprom to the Ukrainian government was politically unpalatable, while for the Ukrainians to have to give up control of their strategic gas transportation pipeline system would also be very uncomfortable.
The whole process has been politically driven from the start. While there are reported to be periodic direct discussions between representatives of the two companies, more contact is happening on a government-to-government level.
The visit by Russian Prime Minister Vladimir Putin to Kyiv in April again generated a brief storm of media speculation about the potential shape of any transaction, but it is now likely that a further lengthy delay will ensue before the situation develops further.
Both the Moscow-based lawyer and an industry analyst in Kyiv said that the summer was the earliest likely date for some form of deal to be announced, although the lawyer also raised the possibility that the whole discussion would end up as nothing more than a media and political charade, generating substantial media coverage and political interest, but no firm conclusion.
A more pressing energy issue between the two countries remains gas transit pricing and direct negotiations between the two governments are continuing over this, noted the sector analyst.
While a full-scale shutdown of transit supplies into Europe next autumn and winter, as happened in 2009, remains a very remote possibility, the issue continues to raise very thorny issues of sovereignty, nationalism and political power between the two countries.
Tied in with the issue of transit supply, is the future of various alternative pipelines from Russia into central Europe. Up to three potential lines are scheduled to be completed in 2015, including the Gazprom-backed Nord Stream around the Baltic States into Austria and the South Stream pipeline, which would also carry Russian hydrocarbons.
A third pipeline, Nabucco, would carry Iraqi, Azerbaijani and Central Asian crudes into Europe and is strongly backed by the European Union and the United States, but, not surprisingly, is highly annoying to the Russians. It is unlikely that all three of the pipelines will be completed, with possibly Nabucco being dropped, but their impact will anyway be negligible on Ukraine’s domestic supply and, if anything, put more pressure on the country’s energy supply, as they will give the Russian side more transit options.
What Ukraine really needs, however, is direct access to the Russian market for its own gas supplies, something that the Russian side is so far unwilling to supply.
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Source: Kiev Post