[Premium] Ukraine to Sign Gas Master Agreements

State monopoly Naftogaz Ukrainy intends to sign five-year general agreements with Swedish Vattenfall and the worldwide commodity trader Trafigura. The aim is to buy gas under the European Federation of Energy Traders' (Efet) master agreement, it told NGW July 20.

Standard Efet agreements govern the terms and conditions concerning the delivery and acceptance of natural gas, but do not oblige Naftogaz to buy gas from the counterparties, it said.

The total value of the Efet agreements will be the sum of values of all Individual contracts thereto to be concluded in case of competitive proposals for Naftogaz in terms of natural gas sale and purchase. The quoted sums under the two contracts – some press reports put the value at over $4bn apiece – "are just five-year estimates and they may differ significantly from actual purchases," it said.

The Efet agreements enable Naftogaz to "further diversify its portfolio of reliable gas suppliers offering competitive prices and favourable conditions. The idea is to optimise Ukraine’s gas imports through choosing the best available offers on the European gas market," the statement concluded.

Vattenfall told NGW substantially the same: "This would only serve as precondition to enter into a transaction. It does not mean that we are close to signing a deal. The framework agreement would enable us to participate in Naftogaz' monthly auctions."

Ukraine has not bought any gas contractually from Russia since late 2015; instead it has tendered for deliveries from European companies.But the gas it receives this way is mostly Russian, having flowed through Ukraine and come back in again from other border points, along with some other molecules from elsewhere.

This has incidentally inflated Gazprom's sales figures to what it calls the 'far abroad' as some of that gas is consumed in the 'near abroad', where its exports have correspondingly fallen.

William Powell