Naftogaz owes USD 1.6bln to Gazprom, asks for delay till mid-April

Макроэкономика 27.02.2014 Ukraine’s state natural gas monopoly Naftogaz (NAFTO) owes USD 1.64 bln to Gazprom (GAZP RM) for gas purchased in 2013 and January 2014, Interfax reported on Feb. 26, citing a Gazprom bond issue prospectus. According to the document, Gazprom is considering a request from Naftogaz to postpone payment till April 15. Naftogaz’s debt to Gazprom was USD 3.29 bln as of the beginning of February. In other news, Naftogaz reported it has significantly decreased gas purchases from Russia from peak levels of 147 mcm per day in the beginning of February to 10-13 mcm per day on Feb. 21-23. Naftogaz purchased 1.443 bcm of gas from Russia during Feb. 1–Feb. 23. Alexander Paraschiy: For as long as Naftogaz can enjoy its temporary gas discount from Gazprom for 1Q14 (as the price has been officially fixed at USD 268.5/tcm), we think the Ukrainian importer should try to purchase as much as possible. It’s evident that Russia will not provide any discounts as of 2Q14 and the import price will come back to the levels of USD 400+ per tcm. The decrease in gas purchases, therefore, doesn’t look logical and most likely is related to problems with liquidity that Naftogaz is suffering from right now. A strong strategy for the Ukrainian government would be to secure some international macro financing in the coming days in order to secure large stockpiles of the tentatively cheap gas. Yet we understand that Gazprom may be unwilling to sell large volumes to Ukraine while the discount is working.