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September 12, 2022

Naftogaz initiates arbitration procedure against Russia’s Gazprom

Naftogaz is seeking payments from Gazprom for the rendered service of natural gas transportation through Ukraine.

Ukraine’s state-owned oil and gas company Naftogaz had launched a new arbitration procedure against Russia’s gas giant Gazprom on the grounds of failure to make gas transit payments on time and in full.

The request for arbitration has been filed by Naftogaz with the International Court of Arbitration of the International Chamber of Commerce in Paris.

Naftogaz is seeking payments from the Russian gas firm for the rendered service of enabling natural gas transportation through Ukraine.

Naftogaz CEO Yuriy Vitrenko commented: “We will make Gazprom pay. Naftogaz also assesses the possibility of additional claims. We will use our experience of victories over Gazprom in arbitration.”

Earlier this year, Interfax reported Vitrenko as saying that Naftogaz initiated pre-arbitration proceedings against Gazprom for not complying with the ‘pump or pay’ clause in a gas transit contract.

In December 2019, Naftogaz, the Gas Transmission System Operator of Ukraine (GTSOU), and Gazprom signed agreements to continue gas transit from Russia through Ukraine until 2024.

It included provision for the transportation of at least 65 billion cubic metres in 2020, and 40 billion cubic metres annually in 2021 to 2024.

In May 2022, Naftogaz declared a force majeure of Russian gas transmission through the GMS Sokhranivka and the border compressor station (CS) Novopskov, located in Russian military occupied territory, citing that the circumstances make it impossible to operate.

Despite this, Naftogaz suggested that Gazprom transfer the relevant transit volumes to the Sudzha interconnection point located in Ukrainian territory.

At that time, Naftogaz said in a statement: “The transfer of the transit flow does not require any extra costs from the Russian side, and there are no technical obstacles for such steps. This way, Russia would be able to maintain transit through Ukraine and fulfil its obligations to European partners.”

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