Weekly news digest June 30-July 06, 2014

The last week brought the news from the government on reorganization of oil and gas industry. The Deputy Head of NJSC Naftogaz of Ukraine Yuriy Vitrenko reported the plans to conduct IPO of the state company. It is expected to sale 15% stake during the first stage, herewith the company was evaluated at $12 billion. Later, this information was confirmed by the Deputy Head of Ukgazdobicha Vadim Shclenchak. These are the first announced details of Ukrgazdobicha privatization plan which earlier were mentioned by the Prime-Minister Arseniy Yatsenuyk only in passing. However, the expectations of the officials might be a little overstated as the terms of IPO are not attractive for investors. It is unlikely that Ukgazdobicha would attract anyone to invest money in it in its today’s condition. The financial standing of the company is catastrophic, gas produced by Ukgazdobicha is sold below its cost – for 419 UAH (VAT inclusive) for 1 th.m3 which is 10 less than price of private companies sales to industrial consumers - 4,700 UAH (VAT inclusive). Moreover, Naftogaz managed to generate a debt in amount of 3 billion UAH even purchasing gas for such a low price. That is why it is needed to resolve pricing and clearance issues for successful conducting of IPO.

Ukrainian companies
KUB-Gaz is curtailing its drilling in Donbas
Ukrgazdobycha is planning to increase gas production up to 16-16.5 BCM by 2017
Naftogaz is planning to sale shares of Ukrgazdobycha through IPO
Naftogaz redeemed the capacities of the Slovak gaspipeline
for reverse gas supplies
Foreign companies
Regal Petroleum increased daily average production by 10% since
the beginning of the year
Shell will remove from operation the first exploratory well in Kharkov region
Shell may delay the start of the first exploratory well drilling at Yuzovskaya area
Oil transit increased by 2.4%, petroleum products consumption
fell by 5% for 5 months of 2014
Politics and world
The reform is being prepared to distribute the natural resources
The Association with the EU offers Ukraine new opportunities in gas sector
The deputies approved the state of emergency introduction in energy sector
The expropriation - according to the martial law?
The deputies failed the reorganization of Naftogaz
The Ministry of Finance has 8 options to replace Russian gas