Ukrainian government to boost natural gas prices 29.1% from April 1

Kiev (Platts)--31Mar2014/112 pm EDT/1712 GMT


Ukraine's National Committee for Power Regulation (NCPR), the government's energy sector regulating body, said on Monday it has moved to increase average natural gas prices for industrial consumers by 29.1% starting April 1.

The committee increased gas prices to Hryvnia 4,020 ($365.50)/1,000 cubic meter for industrial consumers, up from Hryvnia 3,113, the committee said.

The committee also increased prices for gas supplied to governmental agencies and organizations by 64.2% to Hryvnia 4,020/1,000 cu m from 2,448/1,000 cu m.

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The move comes after the government's decision last week to boost the prices to avert financial crunch at the national energy company Naftogaz Ukrayiny.

Hiking domestic gas prices is also one of the main demands from the International Monetary Fund for unlocking up to $15 billion in loans to Ukraine, and will further unlock additional funding from the European Union and the World Bank.

The government will hike domestic natural gas prices for households by 50% starting May 1 and will keep hiking domestic gas prices through 2018.

RUSSIA SHOWDOWN

The development comes as Ukraine is preparing for a showdown with Russia over natural gas prices in April after Gazprom, the Russian gas monopoly, has warned it would boost the prices dramatically.

Ukraine expects Russia to almost double its natural gas prices starting April 1 to about $500/1,000 cu m, up from $268.50/1,000 cu m in the first quarter. Moscow officially moved to cancel previous discounts that had made the gas prices lower in the first quarter.

Russia canceled its 33% discount on gas price that was granted in December 2013 by Russian President Vladimir Putin.

Russia also canceled $100/1,000 cu m discount that was granted in April 2010 for extending the stay of the Russian navy in the Crimean port of Sevastopol by 25 years through 2042.

Russia denounced the April 2010 agreement following a de-facto annexation of Crimea peninsula and the port of Sevastopol earlier this month.

The US, the European Union and Ukraine said the annexation was illegal and illegitimate, and should not be recognized internationally.

The annexation was condemned by 100-11 vote in the United Nations General Assembly in New York last week.

--Alexander Bor, newsdesk@platts.com
--Edited by Derek Sands, derek.sands@platts.com

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