The energy ministry has come up with a proposal to change gas price regulations, the news agency Ukrainski Novyny has reported. If the changes are implemented, the price of gas for households is likely to grow by 8.3% to UAH5,322 (approx. USD190) per 1,000 cubic meters of gas from April 2018, said the agency. In line with the draft, the government will revise gas prices only once a year, from Apr 1, rather than twice a year as now, and the prices will be based on the German NCG natural gas hub average price for April-September of the previous year. Also, religious organizations will lose their current 50% discount from the price of gas for households, said Ukrainski Novyny.
The agency predicted that the national oil and gas company Naftogaz Ukrainy will be against the new rules, as its profit may fall. At the same time, the agency said the IMF may approve the draft. The government, contrary to agreements with the IMF, refused to increase household gas prices from Oct 1, 2017. This was one of the reasons behind the IMF’s non-approval of the fourth review of its EFF programme in Q4’17. We don’t think the IMF will easily agree to increasing household gas prices by 8% or so only, given the rising prices. Naftogaz’s net profit increased by 15% y/y to UAH27.1bn in January-September, but losses from sales according to government-regulated tariffs, including to households, amounted to UAH10.9bn, according to preliminary data from Naftogaz.