If agreed to by both governments, the protocol will maintain natural gas tariffs at current levels in 2006; prices and transit tariffs will then gradually rise in 2007-2009. The document suggests that Ukraine's Naftogaz has moved closer to Gazprom's original proposal. The Russian energy giant hopes to increase the price of gas delivered to Ukraine to $160/mcm, with transit tariffs it pays also rising from the current $1.09/mcm/100 km to $1.75/mcm/100 km.
If the current round of negotiations succeeds, the agreement will bring Ukrainian gas prices to $163/mcm by 2010 according to current oil price assumptions. This is in line with the gas price of $160/mcm proposed by Gazprom.
According to the protocol, Naftogaz will pay current prices in 2006, then $90/mcm in 2007, $109/mcm in 2008, $133/mcm in 2009, and $163/mcm in 2010. The substantially higher payments, approximately $2.5 billion a year, for Russian gas will be somewhat offset by an increase in transit tariffs for Gazprom.
