Russia's state-owned gas giant Gazprom expects to sign a new gas deal with Ukraine by the end of the year, Chairman Alexei Miller said in a statement Thursday.
"Our negotiations have demonstrated significant progress. I think we can expect to reach an agreement on developing our cooperation in the gas sphere by the end of the year," Miller said after a meeting with Ukraine's Energy and Coal Industry Minister Yuriy Boyko.
The current agreements on supply of Russian gas to Ukraine and via the country to Europe expire on December 31.
Ukraine has been trying for months to renegotiate its deal for Russian gas, seeking a lower price, but with no tangible results.
Ukraine plans to import 40 billion cubic meters of gas from Russia in 2011, up from 36.5 Bcm imported in 2010, according to the country's energy company Naftogaz Ukrayiny.
In 2010, Russian gas supplies via Ukraine to Europe reached 95.4 Bcm, up 2.8% from 92.8 Bcm in 2009.
The recent launch of the 27.5 Bcm/year Nord Stream pipeline, which runs across the Baltic Sea linking Russian and German gas pipelines, has reduced Russia's dependence on Ukraine for gas transit.
"At the current level of gas demand, the volumes will be redirected from the Ukrainian route [to Nord Stream]," Gazprom Export's deputy head Sergei Chelpanov said in early November.
He did not, however, rule out increase in gas transiting through Ukraine if demand in Europe grows.
KIEV SEEKS LOWER PRICE FOR RUSSIAN GAS
Ukraine is buying Russian gas at about $401/1,000 cubic meters in the fourth quarter of 2011, compared with $355/1,000 cu m in Q3, $297/1,000 cu m in Q2 and $263/1,000 cu m in Q1, according to Naftogaz.
The prices include a discount of $100/1,000 cu m that Ukraine got in April 2010 for allowing Russian navy's Black Sea Fleet to be stationed in the Crimean peninsula for another 25 years through 2042.
In mid-November, Ukraine's Prime Minister Mykola Azarov said Kiev would save about $500 million/month, or $6 billion/year, after signing the new gas deal with Russia. Azarov's comment suggests that Ukraine has been seeking to lower the gas price roughly by 50%.
Ukraine also plans to switch to paying for the gas in rubles instead of dollars for Russian gas imports, the National Bank of Ukraine reported in November.
Switching to rubles would allow Ukraine to ease mounting pressure on the local currency, the hryvnia, which has been suffering from the widening current account deficit this year, the bank said.
Russia previously indicated that it would be ready to provide additional discounts but only if the two countries were to cooperate more in the gas sector.
In mid-August, Gazprom proposed that Ukraine should follow Belarus and surrender its natural gas pipelines in exchange for lower Russian gas prices. At the time, Gazprom, which already controlled 50% in Beltransgaz, the Belarussian gas shipper, was negotiating to take it over completely, which it did late November. Ukraine, however, did not see this as an option.
"Ukraine goes its own way, and Belarus its own," Azarov had said then.
