Gas consortium - a topic for the presidential candidates

Julia Tymoshenko has declared that her idea for the development of the Ukrainian gas transit system is radically different from that of Mr. Yanukovich and Mr. Tigipko. Both Yanukovich and Tigipko said that they support the idea of a gas consortium to manage Ukrainian gas transit system. While Yanukovich was less clear about the membership in the consortium Tigipko was more clear: 50% in Ukrainian ownership, 25% in Russian and 25% in European. That kind of consortium according to Tigipko would guarantee that the consortium is stable and guarantees Ukrainian interest.

In the recent Focus on Ukraine note from German Marshall Fund its Senior Fellow Jorg Himmelreich seems to support Mr Tigipko (or vice versa):

But more than this: the EU should think about buying into or leasing stakes in Naftogaz by the European Bank for Reconstruction and Development (EBRD) or other international financial institutions. Such an EU investment touches Ukrainian sensibilities about its sovereignty, because gas pipelines and storage capacities are perceived as assets of Ukraine’s sovereignty. But the EU stakeholdership should also be seen as strengthening Ukraine’s negotiating position with Gazprom. The European Union as a stakeholder could then enforce the transparency of Naftogaz and Ukraine’s energy sector—and that would unblock Ukraine’s political and economic transformation.

 Recipy from GMF is enticing. Indeed the time has shown that Ukraine is unable by itself to untangle the gas knot named Naftogaz. European and Russian participation in the gas consortium would seem to guarantee the bright future of the enterprise. However, Russia is interested in making its gas more competitive and EU also wouldn't mind cheaper gas. These interests make Russia and EU perfect collaborators in taming Ukrainian side.

Steel and chemical industry get subsidized electricity

National Electricity Regulation Committee decided to leave the electricity prices for chemical and steel industry intact at least till March 2010. Electricity prices remain stable for these industries since October 2008. Currently, depending on volume of consumption these industries pay UAH 0.4221 per kWt/h or UAH 0.5624 per kWt/h.

Despite promises to reform its energy sector and increase tariffs to cost-covering levels the practices of cross-subsidization in the energy sector persist in Ukraine.

JKX (JKX LN) to raise 37.8 mln pounds to fund development

Reuters reports that Russia and Ukraine-focused oil producer JKX Oil & Gas (JKX.L) plans to raise 37.8 million pounds ($61 million) through a placing of new shares to fund the development of reserves to boost production.

The FTSE 250 company said the proceeds of the placing would finance the building of a second rig at its Rudenkovskoye field and a liquefied petroleum gas (LPG) facility, both in Ukraine, and help it continue its well workover programme in Russia.

It added that the additional cash would also enable it to maintain the ability to make selective acquisitions.

JKX is targeting production of 20,000 barrels of oil equivalent per day in 2011 up from 13,657 bpd in the three months to the end of September 2009.

It said the $11 million LPG facility would enable it to extract increased value from its Ukrainian gas production. To date, the Russian workover programme was "encouraging" with the first sales of gas expected by the end of this year, it added.

The placing, being conducted through an accelerated bookbuilding by Oriel Securities and Brewin Dolphin was priced at 265 pence per share, a discount of 4.7 percent to the closing price on Jan. 25.

The placing shares will represent about 9.1 percent of the existing ordinary shares or 8.3 percent of the enlarged share capital.

Shares in JKX were down 3.3 percent to 269 pence by 0846 GMT, having doubled in value over the last twelve months.

Gas price formula may be changed

Dubina, Head of Naftogaz, noticed that the formula used to set the price of gas for Ukraine is up to negotiation. There was no reaction from Gazprom, however, Dubina thinks that his questioning of the forumla will not lead to the gas war with Russia this year.

EU to give €70 million for energy efficiency in Ukraine

The Eastern Europe Energy Efficiency and Environment Partnership will be launched during a donor conference, jointly organised by the European Commission and the Swedish Presidency of the EU, on 26 November in Stockholm.

The European Commission is already supporting efforts to improve Energy Efficiency in Ukraine, and will begin disbursing €70 million in related sectoral budget support early next year.