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| Gas Deliveries; Ukraine, Europe | |
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| Tweet Topic Started: Apr 26 2014, 02:39 PM (439 Views) | |
| merlins | Apr 26 2014, 02:39 PM Post #1 |
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Republic of Zaire
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Alexey Miller Deputy Chairman of the Board of Directors Ladies and Gentlemen, Gazprom is among the largest gas suppliers in Europe and therefore we are deeply worried about the continuous instability in Ukraine. Seeing that the Ukrainian leadership is facing immense financial problems that manifest themselves in the fact that Kiev is not able to meet its financial commitments, namely regular payments for gas that has been supplied, Gazprom was forced to contemplate an advanced payment scheme. Nevertheless, we are willing to engage in negotiations with our European customers to find a solution for the crisis as we find ourselves in a very complicated situation. On the one had, Gazprom is not a welfare organization and we cannot deliver gas for nothing - contractual obligation are binding for both sides; on the other hand - Gazprom has always been a reliable supplier of energy to our European customers and we want to maintain this reputation. We want to avoid a situation that our main European customers are becoming hostages to the developments in Ukraine. We are talking here about unpaid gas deliveries worth at least 2.2 billion USD. While previously we encountered partial or delayed payments for delivered has, over the last weeks the Ukrainian authorities have not been able to pay a single cent to cover their bills. As it is common practice for all delayed payments in Europe, Gazprom is calculating also delayed payment fines, thus the total amount of money owned by Ukraine could be considerably larger. At this point, we would like to discuss the financial situation in Ukraine and means to enable Ukraine to pay its debts and allow it to pay for gas it requires for its industry and people. We are aware of the fact that the European Union is contemplating a massive financial support program for Kiev and some media outlets had reported that the EU might look into the possibility of covering Ukraine's gas bill. An acceptable solution for us, should this indeed be an option on the table. We do not care who pays, we are interested in the full fulfillment of contractual obligations. However, should we face a situation that we are not able to find a solution and an advanced payment scheme would be required, we fear that this might have negative consequences on our contractual obligations towards our European customers. We do not control the gas pipeline network in Ukraine and we have in the past already experienced problems, for example, gas foreseen for the European market has been illegally diverted for Ukrainian needs. I am here referring to the situation in 2006 and 2009. In case of such event, we are almost confident that we would be able to meet our contractual obligations towards the Baltic States, Poland and Germany using existing gas networks, for example, through Belarus or the North Stream Pipeline. Our South European customers are, unfortunately, in a less favorable situation as most supplies go through Ukraine and the alternative/additional South Stream route is not yet finished. But we are looking into the matter as we speak, so that we have a contingency plan, should it become necessary. We do not want to encounter a situation where - forced by external and uncontrollable factors - we are not able to fulfill our contractual obligations. With that said, I yield the floor and hope for a fruitful discussion. |
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| Eryk | May 4 2014, 01:39 PM Post #11 |
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СССР
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Dyrektor finanowy PGNiG l Chief Financial Officer of PGNiG What exactly then, does Gazprom intend on doing should the crisis evolve to the proportion that previous ones had? Satisfactory measures must be taken to ensure that Gazprom meets its supply contracts, otherwise we will be operating under significantly constrained conditions in the run up to fall and winter where consumption is at its peak. We hope that our Russian counterparts can be accommodating to our concerns, as disruptions in service will require us to turn to other suppliers for the duration of the disruption. Upon conclusion, we would not be able to provide guarantees that Russia would regain its previous position as Poland's prime supplier for natural gas due to constant disruptions. We understand that the situation in Ukraine is unfavorable, however we cannot allow ourselves to be held hostage by the actions of the Ukrainian government. Gazprom has dozens of supply contracts which it must hold true to, and at this point we see either two options; these being Central and Western Europe being held hostage by the situation in Ukraine, and needing to immediately select alternatives at least until the end of the year, or Gazprom works with the Ukrainian government and provides a balanced and reasonable proposal which will not immediately yield the profits it seeks, but will keep relations with dozens of other customers at a more favorable level. We personally would prefer the second option, and hope that the Russian side does too. |
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| merlins | May 5 2014, 10:24 AM Post #12 |
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Republic of Zaire
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Alexey Miller Deputy Chairman of the Board of Directors Gazprom The question is why should Gazprom take more losses than it already has. What is the ongoing practice in Poland in case someone doesn't pay his bills? I would imagine that first there would be a warning, then interest of the amount of money owned and finally a cut-off of service, am I correct? We have been very lenient in regards to Ukraine as a customer and are now asking for a real solution in regards to the money owned, as well as clarity for further gas deliveries. Therefore we are looking into the option to introduce the advanced payment scheme. As said, Gazprom is a hostage of the current situation - we do not control the pipeline network through Ukraine and are therefore dependent on them carrying out their fair share of responsibility. This situation has been recognized by the European Union as well, even more - detachment from energy suppliers and energy infrastructure holders is a policy Brussels clearly promotes, while pointing out towards risks involving too many transit states where each of them holds a particular section of the pipeline network and earns transit fees. Seeing that the IMF, the United States and European Union are providing or looking into options to provide financial assistance to Ukraine, perhaps, a part of this money should be diverted to re-pay Ukraine's gas debts and to ensure a steady flow of gas for its economy and people. The summer season is not problematic, but gas consumption will increase once autumn and winter are upon us. Reducing gas deliveries for the industry while maintaining a minimal inflow for the population is no real solution as it is the economy that generates the income and consumes most of the gas. |
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| Redbirdfan | May 5 2014, 05:18 PM Post #13 |
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Bundesrepublik Deutschland
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Yevhen Bakulin Chief Executive Officer, Naftogaz We have gone through with the challenging economic reform as the first step toward stability. The government in Kyiv is now in the progress of securing the key IMF loans and we expect to pay the debt to Gazprom out of some of those funds and Ukraine's own reserves. |
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| Eryk | May 5 2014, 05:48 PM Post #14 |
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СССР
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Dyrektor finanowy PGNiG l Chief Financial Officer of PGNiG Any analogies to this situation are not particularly appropriate; if Gazprom ceases to provide gas deliveries, the rest of Europe cannot be simply expected to be "understanding" of its situation. If a particular individual fails to pay their debts, only they are affected by law. This is clearly not the case in this situation. We have tens of millions of citizens, all of which depend on Russia fulfilling its obligations. Russia throwing up its arms and blaming Ukraine is not an option. Gazprom is unilaterally announcing an advanced payment scheme which Ukraine must be expected to adhere to; we simply propose that it evaluates other options which would allow for the progressive resolution of the current issues which Gazprom and Ukraine face, without harming almost every other country in Europe in the process. Edited by Eryk, May 5 2014, 05:48 PM.
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| merlins | May 6 2014, 12:20 PM Post #15 |
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Republic of Zaire
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Alexey Miller Deputy Chairman of the Board of Directors Gazprom The Board of Directors of Gazprom has reviewed the options at hand, including the Presidential order on the implementation of the advanced payment scheme as of mid-June, and we could propose a solution that would not have negative consequences on our European customers, while at the same time taking into account the precarious financial situation of Ukraine, but maintaining gas deliveries to it as well. The proposal would mean that Gazprom continues current gas deliveries in the volume that is required for the proper functioning of the Ukrainian economy, but would the currently applied gas price discounts would be removed. While this means an increase of the gas payment bill, we are willing, along the lines of the suggestion of Polish colleague, to implement an affordable payment scheme for current gas deliveries and repayment of incurred debts on previous gas deliveries. At this point it is important to point out that the Russia-Ukraine gas agreement, which included the gas price discounts also stated that Gazprom maintains the unilateral right to review gas prices every three months or remove gas discounts if such actions is deemed as necessary. We have refrained from these actions in the past as our interest - at the end of the day - is a stable and developing Ukrainian economy meaning a stable customer-supplier relationship. The details of the arrangements of the current proposal could be negotiated between Gazprom and Naftogaz if the proposal is deemed as acceptable. If the proposal should be rejected, we would run out of options other than the implementation of the advanced payment scheme, despite the willingness of Ukraine to pay its debts. As the IMF has pointed out, a loan has been granted, but it does not suffice for all the needs of Ukrainian Government and therefore also gas payments on regular (current) deliveries. |
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| merlins | May 10 2014, 02:37 AM Post #16 |
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Republic of Zaire
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Alexey Miller Deputy Chairman of the Board of Directors Gazprom We have taken note of the fact that Ukraine has paid the unpaid gas delivery bill worth 2,7 billion USD, therefore the urgency of the matter has decreased considerably. The Board of Directors considers that at this moment there is no immediate need to implement an advanced payment scheme. Nevertheless, should Ukraine incur financial constraints that would hinder it to pay for ongoing gas deliveries, it is highly advised that the Ukrainian authorities inform us about this fact, so that we can come up with a bilaterally acceptable solution. |
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