Gazprom advance to Naftogaz Ukrainy for transit ends; current payments being made

Gazprom's prepayment to Naftogaz Ukrainy for gas transit ran out in July and current payments in cash have commenced, Gazprom (MOEX: GAZP) spokesman Sergei Kupriyanov told journalists, adding that Ukraine owes over $5.3 billion for gas delivered earlier.

Gazprom's prepayment to Naftogaz Ukrainy for gas transit ran out in July and current payments in cash have commenced, Gazprom (MOEX: GAZP) spokesman Sergei Kupriyanov told journalists, adding that Ukraine owes over $5.3 billion for gas delivered earlier.

Gazprom paid Naftogaz an advance of $1 billion in the summer of 2013 to help Ukraine purchase gas to build up inventories ahead of the winter heating season. The prepayment was sufficient to cover payment for transit until the beginning of 2015 based on the transit fee (calculated based on the price of gas at the time - over $400 per 1,000 cubic meters). However, after Ukraine failed to make timely payment for gas deliveries earlier this year, Russia canceled all the discounts in effect, sending the price up to $485.5 per 1,000 cubic meters. During recent talks a price of $385.5 per 1,000 cubic meters was voiced, but for now Ukraine's indebtedness for gas as well as the fee for transit, are calculated based on gas priced at $485.5.

"Gazprom's advance payment to Naftogaz Ukrainy in 2012-2013 secured payment for Russian gas transit services running up to the middle of 2014, partially including July," Kupriyanov said.

"Despite Naftogaz's huge indebtedness to Gazprom for natural gas deliveries and the absence of formal documents covering gas transit and the relevant invoices, Gazprom, guided by the principle of obligatory fulfillment of the responsibilities it has assumed as a reliable supplier and partner, has made the additional payment for transit in July to Naftogaz Ukrainy," Kupriyanov said.

"Gazprom expects Naftogaz Ukrainy to uphold its commitments to pay the debt for gas deliveries and ensure uninterrupted transit of gas through Ukraine," he said.

The additional payment for gas transit totaled $10.54 million. Gazprom reckons that Naftogaz's indebtedness (excluding amounts owed under take-or-pay provisions), totaled about $5.296 billion: $1.451 billion for gas delivered in November-December 2013 and about $3.845 billion for deliveries in April-June 2014.

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