Ukraine's Householders Start to See Higher Prices

In July the wholesale price of natural gas for residential sector, heating producers and other protected consumers whom Naftogaz supplies under its public service obligations (PSO), rose 7% on the month to hryvnia 2.3/m³ excluding VAT,  supplier margins and high- and low -pressure pipeline capacity charges.

In total, since the start of the year, the PSO price has fallen 51% compared with the same period last year and it is 53% of where it was this time last year, the state enterprise said July 22.

Naftogaz in-house team of analysts say that the prices at the major European hubs started rising in the last ten days of June. What is holding back Ukraine’s prices are the significant amounts of gas in store and the record gulf between supply and demand. As of this month, over 21bn m³ have been injected into storage which is 42% more than this time last year.

As NGW has reported, not all of this gas was injected for domestic purposes as the storage operator has sold capacity to third parties eager to take advantage of this summer's low prices and the relatively high winter price.

Naftogaz CEO Andriy Kobolev said: “Global gas prices typically fall at times of low demand and rise at the start of the heating season and, despite coronavirus, the economic crisis and the reduction in demand, 2020 is no exception to this seasonal rule. In fact the price is still a record low compared with previous seasons and we can expect that the second half will see prices lower than last year. Initial calculations suggest this could be between a fifth and almost a third.”

Since January, the wholesale gas price has been set according to council of minister’s Decree #17, which depends on the actual prices paid on the electronic trading platforms for Dutch Title Transfer Facility delivery in the first three weeks of the accounting month.

But in March, the new market maker emerged in the domestic market: the Gas Transmission System Operator of Ukraine (GTSOU) hwhich tendered for gas for March-December. That showed there was competition, which led to a reduction in wholesale prices

So for setting the gas price for householders in May, Naftogaz, as in April, chose the lower of two prices: the one arrived at using the ministerial decree method, or the weighted average price of gas following tenders held by GTSOU.