Win for Naftogaz in the Final Award in the Gas Sales Arbitration with Gazprom

Naftogaz is not responsible for alleged gas deliveries to the uncontrolled territories in the east of Ukraine

Naftogaz is not responsible for alleged gas deliveries to the uncontrolled territories in the east of Ukraine

The Arbitral Tribunal today found in favour of Naftogaz of Ukraine on all issues in dispute: pricing, take or pay and the setting aside of other anti-competitive and unconscionable provisions.

“We are pleased that we won the gas sales arbitration case on all issues in dispute”, says Andriy Kobolyev, CEO of Naftogaz.

The Tribunal completely rejected Gazprom's USD 56 billion claim for take or pay payments (payments for gas not taken, but with an obligation to pay) for the period of 2009-2017. In addition, Naftogaz was successful in its claim for an over 10 times reduction in annual contract volume obligations for the future to 5 bcm (with minimum annual volume of 4 bcm).

The Stockholm Tribunal stated that gas delivered to someone else than Naftogas in the occupied territories of the Donetsk and Luhansk regions should not be the responsibility for Naftogaz to pay for. Also future deliveries to these territories are not the concern of Naftogaz as long as the occupation remains. Any such deliveries will not be accounted for in the annual contract volume.

Naftogaz was also successful in its claim for a downward revision of the price in conformity with market conditions and compensation for previous overpayments. The Tribunal reduced the price effective as of the second quarter of 2014, when Naftogaz initiated arbitration, by 27% from USD 485 per 1,000 m3 to USD 352 per 1,000 m3.

The Tribunal also declared invalid other provisions of the Contract, notably a destination clause, illegally prohibiting sales of the gas outside of Ukraine.

Naftogaz hopes and expects to be successful with respect to its financial claims in the Gas Transit Arbitration, up to USD 16 billion including interest to be rendered on 28 February 2018.

“Naftogaz will do its utmost to implement the decisions by the Tribunal in good faith. Final clarity on who owes what and to who, how it will be paid and when and how it would be enforced may not come until February”, says Yuri Vitrenko, chief commercial officer of Naftogaz.

The Gas Transit Arbitration will resolve Naftogaz's claims for (i) revision of the Transit Contract in conformity with mandatory European and Ukrainian competition and energy law (ii) revision of the transit tariff and consequent monetary claims, and (iii) compensation for under-deliveries.

“Ukraine is and will remain a reliable energy partner for Europe”, says Naftogaz CEO Andriy Kobolyev.

Corporate Communications Department
NJSC Naftogaz of Ukraine

Other news