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Ukrainian: UkrGazEnergo warns of gas supply disruption

Ukraine’s largest natural gas supplier UkrGaz-Energo warned on Thursday that gas supplies in 2008 are at risk of disruption following the government’s unexpected move to cancel the company’s supply license.

UkrGaz-Energo, which was expected to supply 55 billion cubic meters of natural gas in 2008, or 73% of Ukraine’s overall gas demand, said the move had effectively cut the supply volume to 5.04 billion cubic meter. The company, which is 50% owned by RosUkrEnergo, a Swiss-based gas trader controlled by Russian gas giant Gazprom, said the development may disrupt gas transit going via Ukraine from Russia to the EU. It may also affect supplies to more than 200 big Ukrainian consumers of natural gas, from power generators to steel makers, UkrGaz-Energo warned. “The groundless action may lead to a failure in securing sufficient gas supplies and distribution within Ukraine in 2008 and disrupt Ukraine’s gas transit obligations,” UkrGaz-Energo said in a statement. The company said it will file a lawsuit to try to force the government to reverse the move, but said it will continue to deliver gas to Ukrainian consumers in line with its commitment until the issue is settled. The development underscores the government’s mounting pressure on RosUkrEnergo, Ukraine’s only importer of gas.

Ukrainian Prime Minister Yulia Tymoshenko has long promised to remove the trader from Russia-Ukraine gas trading for its allegedly non-transparent arrangements. But the action was widely expected to be taken at the end of the year to ensure smooth gas supplies to Ukraine in 2008. The move to cancel UkrGaz-Energo’s 2008 supply license in early January suggests the government could have been taking steps to remove the trader sooner than had been anticipated, which might provoke major tensions with Russia.

UkrGaz-Energo was created in early 2006 as a step to alleviate gas price dispute between Gazprom and Ukraine. The dispute led to brief disruptions of gas supplies from Russia to the European Union between January 1, 2006 and January 4, 2006. The creation of UkrGaz-Energo in March 2006 was supposed to give Gazprom some access to gas distribution business in Ukraine in exchange for lower gas prices for Ukraine. The government eventually issued the license to UkrGaz-Energo valid for five years and allowing the company to deliver up to 55 billion cubic meter/year of gas to Ukrainian consumers. (oilandgaseurasia)