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Naftogaz details Gazprom addendum disagreement

08 Mar 2018 16:45 GMT
Naftogaz details Gazprom addendum disagreement

London, 8 March (Argus) — Ukrainian state-owned Naftogaz is keen to sign an addendum to its supply contract with Russia's state-controlled Gazprom but there are two unresolved issues, chief executive Andriy Kobolev said.

Naftogaz wants to reach a deal on the calorific value of the Russian supply it receives as Gazprom would deliver rich gas, Kobolev said.

The firm also wants more flexibility to adjust the daily amount of gas it receives, he said.

Gazprom rejected a proposed addendum to the contract from Naftogaz, saying it contained conditions the firm could not agree to.

The Naftogaz proposal did not comply with the Stockholm arbitration court's December ruling on the 2009-19 supply contract, Gazprom's deputy chairman Alexander Medvedev said. The firm did not detail the areas of disagreement.

Gazprom refused to restart flows to Naftogaz until an addendum is signed. Naftogaz signed the addendum "as we understood it, but received no response," Kobolev said.

The firms had a few meetings in Zurich, where Medvedev said an addendum was not necessary to buy gas, Kobolev said.

Gazprom provided an invoice for March deliveries, which Naftogaz paid, Kobolev said. Naftogaz only found out 10 minutes before flows were scheduled to resume that Gazprom had declined the deliveries, Kobolev said.

Naftogaz wants to sign an addendum and is considering buying Russian gas in April, although Gazprom will not restart deliveries unless an agreement is reached.

Naftogaz would need to show the 2009-19 contract and Stockholm decision to Ukrainian customs authorities every time it receives gas unless there is a legal document implementing the court ruling. This would require Naftogaz to disclose a lot of information it would prefer to keep confidential, Kobolev said.

The Ukrainian firm needed to take Russian gas in March under the terms of the contract following the arbitration decision. Naftogaz paid for 18mn m³/d from Gazprom.

Naftogaz would have had to pay for 4bn m³ under the take-or-pay obligation if it did not buy gas in March, Kobolev said.

The take-or-pay clause does not apply because Gazprom did not fulfil its obligations in March, Naftogaz said.

The original 2009-19 contract included a seasonal profile for deliveries, with more needing to be taken in the winter quarters than in the summer. The necessity to buy gas in March suggests that an adjusted version of that profile remained in place following the Stockholm decision, which reduced the contractual supply to 5bn m³/yr and minimum take to 4bn m³/yr.

Naftogaz requested 18mn m³/d in March, which if maintained until the end of December, will account for just over 5.5bn m³ in the whole of 2018. Flows could be turned down in the summer given the 5bn m³/yr contractual volume.