Ukraine considering Gazprom’s takeover bid

The Russia Prime Minister Vladimir Putin has offered Ukraine a merger, which will bring together both state-owned gas companies. Unsurprisingly, this has not gone down well with the pro-western opposition party led by former Prime Minister Yulia Tymoshenko, who said, “The proposal could be viewed as a joke, but a large-scale plan for the liquidation of independent Ukraine is taking place every day in front of our eyes.”

This proposal follows the decision in April by the pro-Russian President Victor Yanukovich, to extend the Russian Black Sea fleet’s lease on the port of Sevastopol until 2042, in exchange for cheaper gas. As a result there have been mass demonstrations at Ukraine’s Parliament today by both the opposition party’s supporters, and supporters of President Yanukovich.

However, there are alternatives on the table, Mr Yanokovich has offered a modernised version of the Ukrainian gas transit system as an alternative to the proposed South Stream gas pipeline. This pipeline is supposed to diversify the gas supply routes to the EU and will run under the Black Sea. Russia has already started building the sister pipeline, the Nord Stream pipeline, which will run under the Baltic Sea bypassing Ukraine.

Last year, Russia pumped 93 billion m³ of gas through the Ukrainian transit system. Russian officials have stated that the two gas pipelines, when at full capacity, would be able to transport up to 118 billion m³/yr; they have warned that the Ukraine may not be able to fill its transit system if it does not accept the deal. However, Michael Korchemkin, the Head of East European Gas Analysis, doesn’t think that South Stream is even necessary. “The cost of transporting gas through the South Stream pipeline would be three times higher than via the Ukraine,” he told the BBC.

Putting aside the geopolitical edge to this proposed deal, which is still in its infancy, the deal could just represent an attempt by Gazprom to find a cheaper option than the South Stream pipeline, acquiring a share in the Ukrainian transit system would serve its needs. Gazprom has done such a deal before; it owns a share of Beltransgaz, the Belarusian pipeline operator, because it serves its strategic needs.

Read the article online at: https://www.worldpipelines.com/business-news/11052010/ukraine_considering_gazprom%E2%80%99s_takeover_bid/