Andriy Kobolev, CEO of Naftogaz, interview to CNN

Andriy Kobolev, CEO of Naftogaz, interview to CNN

April 17, 2014


Richard QUEST*
Good evening. Tonight, the man who is responsible for keeping the gas flowing into Ukraine may well turn to Europe, not Russia, for its energy needs. The chief executive of Ukraine's state-owned Naftogaz has refused to pay the price currently set by Moscow. And he says a solution may lie by getting gas from the West. He's Andriy Kobolev, and he's Naftogaz's chief executive officer.

The man is just 35 years old. He's been in the top job for less than a month, and he faces three major challenges. The first: tackling corruption within the energy sector. The police have detained the former CEO in connection with a corruption investigation.

Secondly, weaning Ukrainians off energy subsidies from Kiev. How can the company survive without subsidies? Kobolev has warned households will have to pay up to 50 percent more for gas after Russia raised the price and the IMF and international lenders are demanding the government subsidies be cut.

But the biggest and most immediate crisis: Kobolev must try to stop Russia's Gazprom from cutting the country's gas supply completely. Forty- five million Ukrainians depend on Kobolev from succeeding.

I spoke to Andriy Kobolev in an international exclusive interview, and I asked him how difficult it's going to be to keep the lights on in Kiev.

ANDRIY KOBOLEV, CEO, NAFTOGAZ: I believe the solution to this particular issue is somewhere between Ukraine and Europe. Because for us to keep gas flowing means that we need to start getting gas at least European price or market price. We're definitely not going to buy gas at price close to $500.

And the solution we are currently looking for is to get at least European price for gas. If we get the price, it's -- then the problem is resolved. Until we get this, there are problems both for Ukraine and for European consumers.

QUEST: So, you're telling me tonight that you hope in future not to buy gas from Gazprom and from Russia, but to replace that source with European gas?

KOBOLEV: Probably yes. However, we still remain with hope the position of Gazprom will change. We believe that the price for the first quarter of 2014 was market and was adequate to exist in market conditions in Ukraine, which I cannot say about price Gazprom is claiming to start charging Ukraine from the second quarter.

That is why keeping that option open and negotiating with our Russian colleagues, we have not received a formal reply to our request that if the price remains stable, we are ready to cover all existing debts.

However, if we don't find a compromise with Gazprom, we still hope to find a compromise with our European partners, who enjoy much lower price. And if we reverse gas flow in sufficient amount, that will also be a solution.

QUEST: Ultimately, though, it -- what's happening here, surely, is Russia is playing politics with the gas supply to Ukraine. And frankly, no matter what you negotiate, they want to squeeze you. You realize that.

KOBOLEV: It's difficult for me to comment on plans of our Russian colleagues. However, the more they squeeze Ukraine, then the situation is getting worse for Russian gas supplies in Ukraine in the mid and long term. Because I'm absolutely sure we'll find a solution.

But if we find a solution which is not Russian gas, that very likely will lead to the situation when Ukraine will not be buying Russian gas for quite a long period of time. And losing such a high market -- such a huge market, sorry -- I'm absolutely sure it's not something that Gazprom would prefer to do.

QUEST: Where in Europe will you buy reverse gas? And will this be gas that has come from Russia through Ukraine into a European country, and then back to Ukraine again?

KOBOLEV: Formally, we currently have our first contract with one of the European suppliers, and formally, we're also negotiating direct gas supplies from European countries. There is gas that flows into Europe from different directions, and if we have a contract and we have ability and capacity to transit that gas from Europe to Ukraine, then again the problem is solved.

But here, the problem is not the source of gas, but the problem to unlock sufficient capacity for gas inflow to Ukraine. And as we have found out recently, it's not the problem of Europe's gas, it's the problem that the main transit line that goes into Ukraine from European countries is illegally locked by "Gazprom export", which we believe is not in correspondence with European laws.

QUEST: Right.

KOBOLEV: And we are going to unlock that and change very soon.

QUEST: See, this is the problem, isn't it? Whichever way you cut this, whatever you try to do, Gazprom and Russia is basically -- let's be blunt -- they are destined to try and ensure you do not get their gas.

KOBOLEV: This problem is of a legal nature, which I think is a good thing. The bad thing is this is a tradition that has occurred right after the collapse of the Soviet Union. Unfortunately, Gazprom, for many European companies and countries, remains in the position of the key gas supplier, covering Ukrainian borders as the areas of their control.

That is a pure legal thing, and we think if there is mutual intention of both Ukraine and European countries to change the situation, it is absolutely possible to do within very short time.

* The statements of the journalist do not necessarily correspond to the official position of the Company.

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