Naftogaz is in the red: what are the causes of billions in losses and their consequences

Naftogaz is in the red: what are the causes of billions in losses and their consequences

Experts note that the huge loss of Naftogaz in the first half of the year was caused by a number of external and internal factors

25 September 2020, 12:44


Taisiya Erokhina


The consolidated net loss of the Naftogaz group for the first half of 2020 amounted to UAH 11.5 billion. The head of NJSC Naftogaz Ukraine, Andriy Kobolev, assures that such colossal losses are associated with a decrease in demand and prices for energy resources in connection with the crisis caused by the coronavirus. But the former executive director of the company, Yuri Vitrenko, lashed out at his recent colleague with criticism. What caused the NAK’s losses? How will this affect the Ukrainians? Does the state need to regain control over the company that has passed under the actual external management? To these and other questions, “Comments” learned the answers from experts.

“The internal factor, which consists of several components, has the greatest influence.” 

Maxim Bilyavsky, an expert at the Razumkov Center, believes that the unprofitableness of NJSC Naftogaz of Ukraine is obvious. Especially in the first half of 2020. The situation, he said, is explained by both external and internal factors.“In my opinion, the internal factor, which consists of several components, has the greatest influence,” the expert says. “The first is the loss of income from the implementation of goods transportation work due to the separation of the operator of the gas transportation system.It should be noted that the agency fee provided for in the new transit agreement does not correspond to deferred income. Secondly, this is a drop in gas production, which, against the background of a serious drop in quotations in the EU, led to a loss of income. Thirdly, further accumulation of debt obligations of market participants to Naftogaz. “Completing the recalculation of internal factors, Maxim Bilyavsky notes the item “expenses”. They have really grown significantly compared to previous years. This, according to the expert, there are several explanations, including – an increase in labor costs and administrative and economic needs, rent of office space, and the like.”The costs of information and communication services (Vitrenko criticized this – ed.) Is a controversial issue. Ukraine finds itself in a state of hybrid war. This means that the enemy acts through the media. And Naftogaz is one of the subjects of this process. Therefore, countermeasures are needed. threats and maintaining the image of the industry. The question is: to what extent are the costs incurred at market prices? Searching for answers is already the competence of the internal audit and the Accounts Chamber of Ukraine, “the expert of the Razumkov Center emphasizes.As for the external factors that hit Naftogaz, among them Maxim Bilyavsky mentions force majeure: the very coronacrisis that led to a decrease in energy consumption, investment flow, and, in general, forced the enterprises of the industry to re-transform to new production realities, which also requires funds.

“The NAC is not entirely to blame for the losses”

The general director of Neftegazstroyinformatika LLC, chairman of the expert council on the gas industry and the natural gas market, Leonid Unigovsky, believes that Naftogaz is not to blame for all the losses incurred.”There is a novelty in the legislation on the natural gas market since 2015. When fulfilling special obligations (when prices for consumers are reduced in” manual mode “- ed.), The Cabinet of Ministers must develop and approve a procedure for compensation for them. Until now, the government has not adopted the relevant procedure Both Naftogaz and regional gas sales offices fulfilled special obligations (PSO). They did not receive compensation for this, “notes Leonid Unigovsky.He also emphasizes that when Naftogaz last year bought expensive gas to fill our underground storage facilities, it was solving the problems of Ukraine’s energy security. After all, there might not have been Russian transit this year, negotiations dragged on … According to the expert, there should be a law on strategic natural gas reserves. But it, like the procedure for compensation for the PSO, is not.”These are objective circumstances that say that NJSC is not entirely to blame for the losses,” emphasizes Leonid Unigovsky. in the management system. The transition to a divisional management structure was implemented with a certain margin of error. This does not make it possible to effectively manage the enterprises that are part of the NJSC. As a result – production failures. “The expert is sure that the gas price for consumers will definitely rise. The only question is whether it will reach the price of 2019. And will Naftogaz try to include the cost of storage in it.

“Naftogaz should be nationalized”


Academician, First Vice-President of the Academy of Economic Sciences of Ukraine Anatoly Peshko believes that the losses of the NJSC are overstated, and many are created artificially.

“This is evidenced by the fact that I spoke about in advance. As soon as the transit of Russian gas decreases, problems will begin. And the costs of maintaining the GTS, and the fall in income from transportation, and huge bonuses for representatives of Naftogaz (especially the so-called top managers and members Supervisory Board), and colossal corruption in the gas sector – all this translates into losses for the whole of Ukraine. I am sure they will try to cover them at the expense of ordinary citizens. We are talking about raising tariffs, raising taxes, and other ways of filling the budget with managers who do not have enough sense to do it differently, “the expert emphasizes.According to Anatoly Peshko, Naftogaz should be nationalized. And do not allow external structures to manage it.

“In all countries, oil and gas industries, mining is a national treasure. And they are almost never unprofitable. They support almost the entire social sphere. Norway, Denmark, Sweden – people are protected there by natural monopolies, which are run by the state. And only Ukraine has its own path, which so far only leads to a rapid impoverishment of the population and the weakening of the state in almost all spheres, “the academician sums up.