Naftogaz discloses extracts from the arbitration award regarding unbundling

Considering a significant public interest to the TSO unbundling, Naftogaz publishes some provisions on the issue contained in the Award issued by the Arbitration Institute of the Stockholm Chamber of Commerce on 28 February 2018

Considering a significant public interest to the TSO unbundling, Naftogaz publishes some provisions on the issue contained in the Award issued by the Arbitration Institute of the Stockholm Chamber of Commerce on 28 February 2018.

Naftogaz sought in arbitration, inter alia, amending the gas transit contract to the effect that Naftogaz be allowed to assign its rights and obligations under the contract, without the written consent from Gazprom, to any third party designated by Ukrainian authorities as gas transmission system operator.

This would enable Ukraine to retain gas transit under the current gas transit contract in parallel with implementing the unbundling.

In the prevailing version of the gas transit contract replacement of the contract party (and therefore entrance of any independent TSO into the contract) is subject to Gazprom’s consent which has been so far impossible to obtain.

Moreover, Naftogaz sought to subject the contract to mandatory provisions of Ukrainian gas transmission legislation and regulatory framework, including the terms and condition for access to Ukrainian gas transportation system as adopted by the Ukrainian regulator.

Unfortunately, the Tribunal rejected abovementioned claims of Naftogaz. Thus, in order to implement the unbundling immediately, Naftogaz and the new TSO will face the need to obtain Gazprom’s consent for entrance of the independent TSO into the contract.

It is highly unlikely given the position reiterated by Gazprom. If Naftogaz disregards the consent provision, it will be in breach of the contract, which Gazprom is now seeking to terminate. This implies that gas supplies to Europe may be jeopardized, Gazprom will receive a powerful argument to support Nord Stream 2 construction and Ukraine will face the risk of losing gas transit even before the end of 2019.
The immediate TSO unbundling requires either Gazprom’s written consent for the new TSO to enter the contract or reaching a consensus with Gazprom on relevant amendments to the current contract. Both options have been so far unattainable.

Corporate Communications Department
NJSC Naftogaz of Ukraine




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