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Gazprom Initiate Gas Deliveries to Ukraine

Gazprom Today at 5.50 Moscow time Gazprom sent the first request to the NAK Naftogaz Ukrainy United Dispatching Center (ODU) for the transit of 99.2 million cubic meters of gas a day starting from 10.00 via the Sudja gas metering station already under the operational pressure and prepared to feed gas since 13 January.

After the requests from European and Russian consumers had been adjusted, the second request was sent to the ODU for the supply of 423.8 million cubic meters of gas a day towards Ukraine (the second request includes the first one). Of this amount, 348.8 million cubic meters is to be exported through all the major gas metering stations at the exit and entry points of the Ukrainian gas transmission system, with 75 million cubic meters to be supplied to Ukrainian consumers.

At 10.05 Ukraine started transiting Russian gas to Europe, with first volumes pumped via the Sudja metering station. At 11.10, upon approval by the Ukrainian party of the second request, gas was supplied to Ukraine's consumers through other metering stations as well.

Russian gas transit to Europe across Ukraine and gas supplies to Ukrainian consumers were initiated under the agreements reached at night on January 18 by Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Timoshenko. These agreements stipulate that starting from 2009 both countries switch in their relations in the gas sector to the generally accepted and transparent European gas pricing rules.

Within the scope of the agreements reached, on 19 January Gazprom and Naftogaz Ukrainy signed in the presence of the heads of the Russian and Ukrainian governments 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 intermediates between the companies.

The contracts are effective from 2009 through 2018.

The transit contract stipulates for the retention of a beneficial transit rate at USD 1.7 for transit of 1,000 cubic meters per 100 km. The volume of gas transit via Ukraine in 2009 will amount to 120 billion cubic meters. From January 1, 2010 the transit rate will be market based and will be calculated based on the generally accepted European formula.

Pursuant to the contract for gas supply to Ukraine, the price of gas for Ukraine's consumers is calculated based on the commonly accepted 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. Starting from 1 January 2010 Gazprom will start selling gas to Ukraine at the European market price with no discounts.

For the first time the generally accepted European price formula, already applicable for all consumers of Russian gas, has been used in the Russian-Ukrainian relations in the gas sector. The ten-year contracts for gas transit via Ukraine and for gas supply to Ukrainian consumers will be independent from each other. This provides additional guarantees that the situation with the termination of gas transit via Ukraine to European consumers will never repeat.

Ukraine is the last Republic from the former Soviet Union to have switched to market and absolutely transparent relations with Gazprom in the gas sector.

Posted 20/01/09

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