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21 Jan, 2009 07:14

Gazprom looks to make up lost ground after dispute

The two week-long gas dispute cost Gazprom more than $1 Billion in lost export revenues that the company plans to recuperate by the summer.

Slovakia was the first to receive Russian gas two weeks after Ukraine shut off the transit pipeline.

On Tuesday Gazprom shipped 350 million cubic meters of gas bound for Europe and 75 million cubic meters for Ukraine’s internal market.

Kiev will pay an average annual price of 230 dollars per thousand cubic meters this year – 30 percent more than in 2008. And Gazprom CEO Aleksey Miller insisted Ukraine must pay on time.

“The contract foresees a special mechanism in case there are failures in payment, or if no payments are made. If that happens, we will switch to a 100% prepayment from Ukraine. They will have to pay for gas a month ahead.”

Market watchers took that as a sign that tensions remain in Russia Ukraine gas relations. Aleksandr Nazarov, Analyst at Metropol Capital also points to continued criticism by Ukraine’s president Viktor Yushenko of the contract signed by his political rival Yulia Timoshenko.

“These two indicators make me believe that the conflict is not solved. The conflict is solved only in the part of continuing the gas transit to Europe. Regarding the Ukrainian consumption of gas, I expect more conflicts, more issues, maybe in the summer, maybe next year. But I am sure we will hear again about it in the next 12 months.”

During the past two weeks of gas disruption Gazprom lost $2.5 Billion in export revenues. But the company hopes to recoup the money by summer according to Gazprom’s Deputy CEO, Aleksandr Medvedev.

“But we do hope that the rest of the year we will be in a position to supply additional gas to our customers, and also to refill our underground storages, and the storages of our partners, which have been intensively used during this current crisis period. So we do hope that at least part of these damages could be partly compensated by additional deliveries to European customers.”

The gas dispute forced Gazprom to cut production by 200 million cubic meters per day. As transit resumes, market watchers say Gazprom must restore full production as fast as possible.