Unnatural gas deal: Ukraine reportedly duped on $1bn gas project

One of Ukraine’s steps to energy independence quickly turned into a fiasco after signing a $1.1 billion deal on joint construction of an LNG terminal on the Black Sea. Now Kiev is trying to figure out with whom it actually signed the contract.

­Earlier this week Ukrainian authorities announced they reached an agreement with Spanish energy company Gas Natural Fenosa to create a joint venture to develop an LNG terminal. However, the Spanish company’s officials later denied they signed any documents.

The deal widely reported in the country’s media was signed in the presence Prime Minister Mykola Azarov, Energy Minister Yuriy Boyko and Vlad Kaskiv, head of Ukraine’s state investment agency. According to the press release, Director General for Communication at Gas Natural Fenosa (Spain) Jordi Garcia Tabernero put his signature for the Spanish side. Financial Times identifies the man as Jordi Sarda Bonvehi citing Ukraine’s state investment agency.

However, later Gas Natural Fenosa officials said none of its representatives took part in the ceremony and that Bonvehi doesn’t represent their company or affiliated structures, and the company wasn’t aware about the project and had no plans to participate.

Now Ukraine is checking whether a person identified as the representative of Gas Natural Fenosa had legal authority to sign the deal on joint venture, the Ukrainian Energy and Coal Industry Minister Yuriy Boiko has said.

"

They [papers] were signed by a representative of the Spanish company. We are currently settling technical matters, trying to find out whether the signatory had the power [to sign the deal],

" he told journalists.

On Tuesday the Ukrainian newspaper Segodnya reported President Yanukovich is expected to invite Qatar to invest about $800mn into building a LNG terminal on the Black sea. Earlier the President had announced plans to cut imports of Russian gas to 18 billion cubic meters instead of the contracted 32 bcm in a bid to cut the energy dependence from Russia.

Meanwhile experts remain dubious not only about the LNG deal, but also about the Ukrainian project itself.

“We’ve been hearing about this LNG terminal on the Black sea for several years! It’s a fairytale! That’s not the case that they can’t find megabuck investment for this project, there’s no gas and no suppliers, that would fill this terminal,” says Konstantin Simonov, the head of the National Energy Security Fund.

Meanwhile Ukraine's opposition accused the country's President and Prime Minister of striking the fraudulent deal.

“The oppositions demands an immediately probe into President Yanukovich, Prime Minister Azarov and the head of the state investment fund Kaskiv on the fraudulent deal with an unknown Spanish investor that could result in millions of losses for Ukraine and the loss of the territory of whole regions,”  Yulia Tymoshenko Bloc-Batkivschyna (BYT-Batkivschyna) said in a statement.

The party's parliamentary leader Serhiy Sobolev pledged the agreement between Ukraine and the Spanish firm would be the subject of the new parliament's first inquiry.