Why Ukraine has monopolized gas supply market

Elizavetovka Insured All the Children Of the Village At the Expense Of the State Budget
Mon.Nov. 2018
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Why Ukraine has monopolized gas supply market

In Ukraine, the gas supply market is monopolized. NJSC “Naftogaz” is trying to destroy the Firtash’s empire and offer Ukrainians an alternative gas supplier.

This process has already begun. In 2015, Maxim Golosnoy was elected as the Head of the Elizavetovka village council, Petrikovsky district, Dnipropetrovsk region. By that time he had been known as the author of the “Grandma and a Cat” billboard.


“After a while, I was approached by some representatives of two enterprises, “Dnepropetrovskgaz” and “Dnepropetrovskgaz Sales”, – said Maxim Golosnoy at a press conference in early 2017. – They brought me a few contracts and proposed to antedate them. I refused. No one can force any head of the local government to sign any agreements, moreover to antedate.”

That was the beginning  of  he confrantation between the Head of Elizavetovka and the gas companies in Dneper, which finally resulted into trial. Apart from the trial, a cut-off gas and cryminals, that attacked the village council took place in the story. Taking into account Maxim Golosnoy’s last year statement, there is no information available in the Unified Register of Legal Entities and Individual Enterpreneurs of Ukraine about the founders of the company “Dnipropetrovskgaz Sales” and its ultimate beneficiaries. But as it goes from the minutes of the meeting of the Supervisory Board of PJSC “Dnepropetrovskgas”, the decision to establish the sale of “Dnepropetrovskgas LLC” was made in Nicosia. The founders- members of the Supervisory Board of  the PJSC “Dnepropetrovskgas” are all  Cyprus companies. What is the point of paying gas bills to Cyprus companies?


“In 2018 our company proposed to supply gas to the public. Today you can find us  in 20 regions of Ukraine. We have more than 250 thousand consumers. Our aim is to constitute the idea of possibility to change a supplier as well as of completing a relevant procedure, and then pass this message on to the consumers. All our consumers are mainly from the the Kirovograd region, and – only 100 out of all are from the rest of Ukraine. The process of transition to our company service is implemented differently. In some territories the cases of threatening, overt pressure, and other methods of influence were reported to have taken place”–  Mikhail Savchenko, director of the “Gas supply company“Naftogaz of Ukraine”LLC,  said at the press conference in Kiev.


Today, all regional gas sales companies are regarded to be the subsidiaries of the regional gas companies, with 70% control of the well-known Firtash group. The ownership of the all regional gas companies corporate rights belongs to the companies, registered in Cyprus: Pasler Enterprises, Kreser Holding, Nesib Ventures, Porala Ventures. Virtually, the “Cypriots” turns out to have entire control of gas industry.

Dmitry Firtash – the oligarch who controls the regional gas industry of Ukraine


According to the Deputy Director of the Energy Efficiency Department of NJSC “Naftogaz of Ukraine”, Aleksey Khabatyuk, PJSC “Gaztek” is a part of the ownership structure, current in most regional gas supply companies. The process of their privatization was not entirely transparent. In fact, the founders of “Gaztek” are definitely the same well-known Cypriot companies, which, according to the media reports, belong to Mr.Firtash.

The first stage of monopolization was the impairment of assets of gas supply companies. In 2005, the law was passed: “About the measures, aimed at ensuring  sustainable operation of the enterprises in the fuel and energy industries”. It entailed opportunities for enterprises  to reduce and avoid the responsibility for violating the procedure of payment for purchased gas. The debtor was meant not to worry in front of the creditor and carelessly building up debts. The extension of time to consider the lawsuits also prompted enterprises to go technical bankrupts. The imperfection of the legislation allowed the companies to be in such a procedure for a long time and not to pay back their debts. The financial distress the companies had got into,  made it possible to take them over. All regional gas companies set up their own sales and sales departments, transformed them into separate structures, subsidiaries – regional gas sales companies.


The law stipulates that anyone, including a household consumer, can change the supplier. To accomplish  this, a consumer must settle with the previous supplier, inform a current supplier about his intention to change the supplier and sign an agreement with a new one. However, in practice, there are several mechanisms valid for assigning a consumer to a specific gas sale and then forcing him to keep it illegally. First of all, it is about making an agreement. For example,if a new house is connected to a gas pipe and wants to make a gas distribution agreement with the regional gas station, and a supply agreement with the third independent supplier. He applies to the regional gas service center and receives a package of documents. But at the same time, this package contains a gas supply contract with gas sales company. Thus, there is no option.

In order to keep a consumer, a combination of artificial debts with additional charges of gas volumes for getting the charge to standard conditions,are being made. In practice, a consumer receives one volume of gas at the gas meter, and another is in his bill. For example,there are 100 cubic meters are registered by a gas meter, but in fact, a bill for 103 cubic meters is issued. It  difference would seem to be not big. But this debt is made retroactively and additional volumes are charged for the three previous years.

Consumption rates changed several times with the later  invalidation in court. Ordinance 203 and 237 were invalidated too. As a result, lately, especially in November, people have been receiving bills with additional charges for the last 3 years at increased consumption rates. For example, earlier, the norm set by the Ordinance 203, was 3.3 cubic meters per person per month, but now  the required norm amounts to  9.8 cubic meters. At the same time, today several lawsuits are being reviewed  at the courts. They appeal to the court asking it to oblige gas companies to devise the mechanism enabling to calculate additional charges for previous periods. Even if these losses of regional gas and gas sale have been registered, they qualify it as a violation, committed due toa  non-compliance with the procedure for preparing such a legislative act. The civil code states that such refunds should take place not at the expense of a consumer, but of the state. People can not change the supplier, because the debts are being charged and people do not agree with them and are not willing to pay.

If  Naftogaz will be able to outdo the Cypriots – is the question, that still remains unanswered. After all, people are just  not allowed to break their contract with the regional gas and gas sales companies.

Huge debts, that have come out  from nowhere, are a compelling  argument for postponing  this issue. You can read about fake debts for gas here.

Margarita Khorunzhaya

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