UAH 35-45 per cubic metre: regions declare emergency over gas shortage, but Office of the President insists situation is under control

Meanwhile, Putin accuses Ukraine of allegedly "pumping out gas intended for the EU".

Four regions have declared a state of emergency over high gas prices for municipal and budget enterprises, despite the memorandum on preferential prices signed by Zelensky.

Meanwhile, the President of Russia accuses Ukraine of allegedly pumping out gas supplied to the European Union, even though all supplies are currently carried out through volume metering systems.

We explain in detail the latest developments in the gas situation in Ukraine.

Emergencies in Ukrainian regions

On October 11, Ivano-Frankivsk, Zakarpattia, Khmelnytskyi and Odesa regions introduced a state of emergency due to gas prices for municipal and budget enterprises.

The Odesa Regional State Administration noted that due to the rise in gas prices, service providers cannot fulfil contractual terms, and schools, hospitals and other municipal institutions cannot pay for services that have become many times more expensive. Today the gas price is about UAH 40 per cubic metre.

It is known that as early as the beginning of 2021, budget institutions concluded contracts for gas supply at a tariff of UAH 11.5 per cubic metre, but now this price has risen significantly. Heat suppliers are sending budget institutions letters warning of supply cutoffs.

New contracts have not yet been formalised, and this could lead to a disconnection from gas supply.

Regions note that the situation could disrupt the heating season and the educational process, as well as halt the provision of medical services. If air temperatures drop sharply, the lack of heating could cause emergencies.

As is known, since September many gas supply companies have started refusing contracts previously concluded with cities due to a substantial increase in gas prices.

Non-functioning memorandum on preferential tariffs

As gas market analysts Serhiy Golovnev and Yuriy Vynnychuk explain, across Ukraine, heads of schools and kindergartens that heat premises with their own boiler rooms face a choice: buy gas at UAH 35-45 per cubic metre to start the heating season, or shut down.

It is noted that the memorandum on not raising tariffs for heating and gas for the population and budget institutions, signed on September 30 under the leadership of President Volodymyr Zelensky, does not work in terms of gas supplies to the state and municipal sector.

The memorandum stipulates that until the end of the 2021-2022 heating season, tariffs for heat and hot water will not rise. The gas price will be UAH 7.42 per cubic metre for heat suppliers to the population and UAH 13.66 per cubic metre for budget institutions and heat suppliers to budget institutions.

The gas supply company Naftogaz Trading, which is part of Naftogaz, was obliged to sell gas at these prices. But for budget and municipal structures, this memorandum does not work.

By law, budget institutions are required to conclude contracts only through tenders. They do hold these tenders, but Naftogaz Trading does not take part in them.

Heads of local authorities say they cannot contact Naftogaz Trading to persuade them to come to tenders at the prices specified in the memorandum.

At the same time, due to high gas prices, private suppliers are massively terminating contracts with the state and municipal sectors that were previously concluded at lower prices.

Gas suppliers say such situations are widespread across the country. This is confirmed by tenders published on Prozorro. The expected cost in them corresponds to a price of 35 to 45 UAH per cubic metre.

This indicates that NJSC Naftogaz does not come to these tenders, but private suppliers with market prices from UAH 35 per cubic metre do.

What Zelensky's office said

First Deputy Head of the Office of the President Kyrylo Tymoshenko responded to information about a meeting of a number of fuel and energy and emergency commissions on declaring emergencies over gas supplies in the regions, and stated that "there are no problems with gas at all".

Kyrylo Tymoshenko
Deputy Head of the Office of the President

There is a lot of manipulation in the press and from opposition politicians regarding heating tariffs. Some "experts" and media are also fanning panic over regional fuel and energy and emergency commission meetings on declaring emergencies over gas supplies in the regions.

Tymoshenko said that the fuel and energy and emergency commissions are now meeting in the regions only to resolve technical issues in order to speed up the signing of gas supply contracts.

He also noted that until October, NJSC Naftogaz of Ukraine is ready to sign all contracts with social sphere consumers, including schools, kindergartens and hospitals.

Kyrylo Tymoshenko
Deputy Head of the Office of the President

It is enough to spread panic. The gas price on the market is indeed soaring, but the state is helping local self-government overcome this crisis by all means. Among other things, with the help of a special price.

Putin's disinformation

Against the backdrop of current resonant events, Russian President Vladimir Putin added fuel to the fire, claiming that Ukraine is allegedly "pumping out gas from underground storage facilities intended for European buyers".

Vladimir Putin

There, some irresponsible politicians in Ukraine say that this gas in Ukraine's underground storage, which does not belong to them, should be nationalised. And what do we see now? A gradual pumping out of gas from underground storage in Ukraine has begun by these private operators, including foreign operators.

It is unknown how the Russian side could obtain such information, and it is also unclear how gas could be pumped out for third-party buyers given the established gas metering systems (meters).

At the same time, Putin stated that Russia is ready to increase gas transit, but there need to be appropriate applications.

He also added that increasing gas supplies to the EU may be dangerous.

According to Putin, "the wear of Ukraine's gas transmission system is about 80-85%, and in order to maintain or increase pumping, this system needs to be brought into normal condition", because if the pipe "bursts", Europe will be left without this route.

The question also remains open of where the Russian side could have detailed figures on the condition of Ukraine's gas transmission system without access from Gazprom engineers.

This statement is likely related to the completion of construction of the Nord Stream 2 bypass pipeline in an attempt to reduce gas transit through Ukraine.