Traders expect UGV to auction its natural gas
Market participants polled by ExPro believed that after the termination of PSO on August 1, 2020, the JSC UkrGasVydobuvannya (UGV) should sell its produced natural gas at transparent auctions in order to avoid schemes and manipulations.
“Open and public auctions is the only right way for UGV to sell its gas. And the lots should be diversified depending on the volume, on the type of payment. In addition, it is necessary to involve banks, which could provide guarantees for traders who are unable to immediately pay in full. It`s the only way that we can build our own market, “ TAS Energy LLC’s Director Maksym Dmytruk commented to ExPro, adding that old non-transparent mechanism for sales of natural gas produced by the UGV to the NJSC Naftogaz of Ukraine is out of the day and one oughgt to check transparently how the price was formed for the NJSC Naftogaz of Ukraine, and whether it was calculated to reflect the cost of the natural gas in full. This comment was fully supported by Igor Delov, Director of Incorgas LLC.
At the same time, market participants diverged in their comments as to the sales volumes of the natural gas liberated for the UGV. Some believe that the entry of UGV into the free market with large volumes of natural gas will crush the prices, and that will affect both traders and other Ukrainian natural gas producers. “The UGV ought to sell their natural gas on the Ukrainian Energy Exchange. The question is about its amounts. I don't think they'll come out with big offers right away, it could crater the market, and I don’t think they're interested in such a scenario, “ the Director of Commercial Department of the JV Poltava Petroleum Company Andriy Dovhaniuk shared his thoughts to ExPro.
Another trader expressed his opinion that the UGV should in any case sell the entire resource at open auctions. "We must shape the market. If there is a glut of natural gas in the market, its prices are going down, and can be even lower than in Europe. That will allow traders to export some of the natural gas. If there is not enough gas, the price will be formed as pegged to the hub where Ukraine shops for natural gas, taking into account the cost of its hauling into Ukraine.
Earlier, the UGV’s Director of Commercial Department Sergiy Fedorenko assured that the UGV would sell its natural gas on the free market by itself, rather than delegate the sales solely to Naftogaz Group. The Naftogaz Group and its Gas Supply Company Naftogaz Trading LLC. The Naftogaz Group will offer natural gas to households and resident consumers, heat and power generating companies, and industrial consumers and industry on market conditions at market prices after the termination of the PSO," said Sergiy Fedorenko once.
On May 28, 2020 the NJSC Naftogaz of Ukraine took a decision to conclude with the UGV an additional agreement to the Contract No. UGV 4962 / 52-20 dated 30.04.2020 for the purchase and sale of natural gas, extend the latter from June 1, 2020 until April 30, 2021, inclusive. According to the additional agreement, the UGV will additionally supply 8.961 bcm of natural gas worth UAH 30.55 billon (including 20 % VAT) and priced at 2 841.46 UAH/tcm (excl. 20 % VAT) for the NJSC Naftogaz of Ukraine during the specified period.