Gas market in Ukraine: a monopolist is dead. Long live the monopolist

  • Gas market in Ukraine a monopolist is dead Long live the monopolist

KyivThree years after the adoption of the Law “On the Gas Market in Ukraine”, the market not only did not appear but also has all the signs of further monopolization and elimination of competitors of the state-run NJSC Naftogaz of Ukraine. It is still stated.

In the logic of reformers, the gas sector had to be transformed in a short time from a conditionally “socialist model”, when tariffs for the population are subsidized from the budget into liberal, when tariffs for the population and industry are uniform, there is no state subsidization of gas tariffs and new players enter the market who are able to structure it compete with "Naftogaz Ukraine". At least as early as July 15, one of the “audacious reformers” of NAK, commercial director Yuri Vitrenko stated that the goal of Naftogaz’s leadership is to create a “competitive, open free market” in which NAK will simply not have a place and he will have to leave. But something went wrong.

First, the story failed with an increase in tariffs. The population started with an active handling since the beginning of 2015 when there was the first round of talks with the IMF (International Monetary Fund). It was planned that the social norm of gas consumption will be maintained (up to 2400 cubic meters per year) if gas is used for heating. In this case, the tariff should have been 3600 UAH with VAT and transport. For all others - 7200 UAH per thousand cubic meters. Then they decided to cancel the social norm, leaving only 200 preferential cubes of 3,600 for the heating season. But, however, it also extended to consumers in apartment buildings that only have a gas stove or gas stove and a column.

It was assumed that the so-called transition period will last even in the hot season for 16-17 years. That is, the discount price will be increased, and the top bracket will remain unchanged. But the government of Groysman in the best traditions of the Komsomol leaders who took on increased obligations and at the very first meeting of the new Cabinet of Ministers Resolution No. 187 was adopted, which set a single price for the population at the level of 6879 hryvnias per thousand cubic meters. Later, it was adjusted for another 80 hryvnias, but this increase has passed almost unnoticed.

But the gas market has not started to function. The growth of tariffs led to serious social and economic problems. The Cabinet of Ministers was forced to launch a subsidy scheme in order to compensate for the negative effect. But in essence, these were the same subsidies of the NJSC “Naftogaz of Ukraine”, only according to a more complex scheme. According to preliminary estimates for the period from 15 years, about 200 billion hryvnias of state subsidies, including subsidies, were transferred to the NJSC. At the same time, the leadership of Naftogaz continues to demand 110 billion hryvnias from the government in compensation for gas deliveries at low rates in the 16-17 years.

While the population of Ukraine is increasingly tied up in subsidy schemes and “energy poverty”, the leadership of Naftogaz began to change its position regarding the liquidation of the NJSC. By the middle of the 17th year, Naftogaz started talking about the need to create a state-owned vertically integrated company. Apparently, the concentration of financial flows from the transit of Russian gas and gas tariffs increased 9.5 times for the population and significantly changed the position of oil and gas reformers. This became especially noticeable after the decision of the Stockholm arbitration, which essentially did not reflect the main requirements of Naftogaz, but the positive financial balance on the results of the arbitration allowed Kobolev and Vitrenko to talk about victory. Although in fact neither the promised reduction of tariffs nor the separation of Ukrtransgaz from the NJSC did not happen.

The recent press conference of Yuriy Vitrenko only confirmed the fears that the reform of the gas market has almost completely collapsed and Naftogaz is creeping in not only the gas import segment but also the gas supply segment to all categories of consumers in Ukraine. On the basis of the bankruptcy of NAK DK "Gas of Ukraine," it was proposed to form three LLCs, which will have to supply gas to the population, enterprises of municipal energy and industry. That is, in fact, three private companies are being created that can accumulate billions of hryvnias received from Ukrainian consumers, resell Ukrgasdobych gas at the prices of a German hub and initiate bankruptcy procedures against utilities for their subsequent takeover.

I want to remind you that a similar attempt to aggressively seize the adjacent energy sectors has already been made by Naftogaz at the beginning of the 15th year. Then a draft law “On Amendments to Some Laws of Ukraine to Stabilize the Financial Condition of Naftogaz of Ukraine” was introduced to Parliament. The project provided for the possibility of selling the right to claim debts for gas in favor of third parties. The sale of the claim was to be conducted at auctions. Auctions could be held four times (if no one had bought the right to claim the previous one). At each subsequent auction, the discount grew and could amount to 70% of the original amount owed to Naftogaz. It was under this bill that Naftogaz actively began to inform the general public about the excess of gas consumption limits by all categories of consumers and, above all,

Then it did not work out. But the debts of gas distribution companies (regional gas companies) and TKE enterprises continue to grow in the last few years like a snowball. And it is worthwhile for them to renegotiate contracts with newly created “private benches” from Naftogaz, as the bailiffs will be in the offices of these companies the next day.

What can be said in conclusion? Such a widely publicized campaign to form a gas market in Ukraine has become nothing more than a grand scheme of redistributing financial flows in the gas sector. Of the initially stated goals, “bold reformers” of Naftogaz achieved only an increase in tariffs for all categories of consumers, an increase in the energy poverty of the Ukrainian population, and the creation of conditions for unfriendly absorption of gas and utility enterprises.

Valentin Zemlyansky, for FNI

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