Ukraine averts June gas cut with $786.3m payment

Ukraine's state oil and gas company Naftogaz has avoided Wednesday’s potential Russian gas supply cut by paying $786.3 million to Gazprom.

Naftogaz made a payment on Friday for gas imported in February and March this year, beating its 2 June deadline for its initial payment, following threats from Gazprom that it would cut supplies on June 3 if the company did not meet its deadline.

UK energy traders said gas markets across Europe breathed a sigh of relief Monday morning, with the UK price of gas for this winter shedding 1.5% in value to change hands just below 60 pence per therm at 09.30 BST.

But analysts at RBC Capital warned that further payment deadlines still need to be met in the short term to keep Russian gas flowing through Ukraine.

“Payments dating back to November 2013 and for deliveries in April and May 2014 remain unsettled,” an analyst note said Monday morning.

“This is progress, but talks continue to ensure that Gazprom’s actions do not affect supplies to the EU,” the analysts added.

Gazprom CEO Alexei Miller told a Russian newswire that the company expects the next installment of $500 million to be paid by June 9.

Naftogaz needs to clear debt for April and May gas imports as well as for imports prior to April 1 which totals more than $2 billion. In future Gazprom will demand advance payment for gas deliveries as part of its pre-payment regime.

“[The] introduction of the prepayment regime will depend on repayment of the debt for gas delivered prior to April 1 – totaling $2.237 billion, a portion of which was paid today – and from progress in payment for deliveries in April and May,” Miller told reporters from Interfax.

“Payment for May must be made before June 9,” Miller added.

Talks between Ukraine, the European Union and Russia on ensuring gas supply to the European region are scheduled for later on Monday.