Government “cleans” gas market for "Naftogaz of Ukraine"

LLC «Newfolk»
Press release
Kyiv, 12 November 2014
Resolution №596 dated 7 November «On the procedure of procurement of natural gas for industrial, power and heat generating enterprises" issued by the Cabinet of Ministers, which was published only on November 10 requires industry to buy gas from NJSC "Naftogaz of Ukraine" from 01 Dec 2014 to 28 Feb 2015. In addition to the document is a list of 80 largest companies to change their gas suppliers.
Private gas extracting companies that were previously selling gas to enterprises were deprived of their major customers which got into hostage of "Naftogaz".
The list of companies that are prohibited to buy gas from anyone else except NJSC “Naftogaz” includes price-formating private players from almost all segments of Ukrainian economy. The largest steel and heat-generating enterprises as well as manufacturers of glass, industrial manufacturers and food companies, such as "Coca-Cola", "Sandora" and some chicken-farms became dependent on the "Naftogaz".
As to the director of oil and gas consulting company "Newfolk" Andrey Zakrevskiy, this step of the Cabinet of Ministers is contrary to several laws of Ukraine, namely Article 6 of the Commercial Code, which directly indicates the prohibition of state interference in gas market. Also article 15 of the Law of Ukraine "On Protection of Economic Competition" is being broken. By this Resolution Cabinet of Ministers, in fact, negates principles of free competition in oil and gas market.
In addition, the government is at odds with the Law of Ukraine "On Principles of Natural Gas Market". It violates Articles 7, 8 and 9, that essentially duplicate Third Energy Package signed by Ukraine and the EU. These articles directly guarantee both consumers and producers of gas state freedom from discrimination in the process of purchasing, transportation and storage of natural gas.
Market participants, including representatives of private gas producing companies, specially noted big harm the Resolution brings about for investment not only into Ukrainian oil and gas sector, but also other spheres consuming natural gas. "We should stop impeding people to engage in gas business. Then gas production will rise, people will be with the heat, Ukraine will accept investors and companies will develop" - summed up Arthur Somov, financial director of the "Karpatygaz".
LLC "Newfolk" – a consulting company that provides marketing, information and consultancy services to oil and oilfield service companies. Website: www.newfolk.com.ua