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GAZPROM

February 24, 2009

Board of Directors considers relationships with Ukraine

The Board of Directors’ meeting is in progress at the Gazprom Headquarters.

The Board of Directors took notice of the information relevant to the status of gas payments by Ukraine’s business entities and Gazprom’s strategy for relationships with NAK Naftogaz Ukrainy.

The Management Committee was entrusted with stepping up actions to implement the provisions of contracts for gas supply to Ukraine and for gas transit across Ukraine. The achieved results are to be reported to the Board of Directors in September 2009.

 

Background:

On January 19 Gazprom and NAK Naftogaz Ukrainy signed new separate long-term contracts for Russian gas transit to Europe via Ukraine and for gas supply to Ukraine’s consumers. The contracts provide for no intermediaries between the companies and are effective from 2009 through 2019.

The transit contract stipulates retaining the beneficial transit rate of USD 1.7 for the transportation of 1,000 cubic meters per 100 km. From January 1, 2010 the transit rate will be market based and will be calculated based on a generally accepted European formula.

Pursuant to the contract for gas supply to Ukraine, the price of gas for Ukraine’s consumers is calculated under the European formula with the discount rate of 0.8. Thus, in the first quarter of 2009 the price of gas for Ukraine’s consumers will account for USD 360 per 1,000 cubic meters. The price will be adjusted under the formula on a quarterly basis. In 2009 the volume of gas supply to Ukraine will be 40 billion cubic meters. From January 1, 2010 Gazprom will start selling gas to Ukraine at the European market price with no discounts.

The gas supply contract provides for measures aimed at enhancing Naftogaz Ukrainy discipline of payments. In particular, if during the first seven days of the month following the delivery month Naftogaz Ukrainy doesn’t pay at all or in full for gas deliveries, the parties will switch to a system of upfront payments for the entire remaining period of the contract.

Pursuant to the signed documents, Gazprom’s strategy in the relationships with Naftogaz Ukrainy is based, inter alia, on the principles as follows

- securing natural gas deliveries to Ukraine and transit volumes across its territory to European consumers;

- monitoring the timeliness of payments for gas delivered to Ukraine and stepping actions to ensure it;

- presence in Ukraine’s domestic market via the wholly owned subsidiary Gazprom sbyt Ukraine.

 

 

 

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