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“Gas producing and gas supplying companies have been in a state of shock since Monday - the Ukrainian government has taken their clients away to give them to Naftogaz of Ukraine,” the Ukrainian publication Capital reported on Wednesday.
“The Cabinet of Ministers has made numerous attempts during the year to ‘press’ private gas producers, which are increasing gas production as distinct from state companies. It seems that it has now succeeded in its attempt: some companies are ready to halt gas production in winter,” the publication said.
The Ukrainian government’s resolution on natural gas purchases by industrial, power and heat generating enterprises obliges large industrial enterprises to buy gas only from Naftogaz from December 1, 2014 to February 28, 2015.
“Natural gas purchase from other supplies is prohibited,” the Ukrainian government warned.The government’s decision is a disaster for private gas producing companies, Poltava Gas and Oil Company Financial Director Yevgeny Palenka told Capital.
“Now they have to declare a force-majeure because it will be impossible to continue operation in new conditions. In July, the subsoil tax rates were raised sharply and the current decision has dealt a second blow. It seems that the Cabinet of Ministers has decided to destroy private gas production,” he said.
Private gas producing companies will now lose their clients with whom they have signed their contracts and will even “lose the right to transport their gas for pumping into storage facilities, which means they’ll be forced to halt extraction in the coldest months of the year and, naturally, stop paying taxes,” the financial director said.
Gas extraction will become “simply impossible physically and economically inexpedient” for private gas producing companies,” he said.
This situation will reduce the volume of tax collections while “some communities will simply be left without gas amidst winter,” the expert said.