OREANDA-NEWS. May 23, 2016. The establishment of a single gas price will provide an opportunity to curb corruption in the gas area, restore Ukrainian gas production as well as to achieve energy independence of the state. Prime Minister of Ukraine Volodymyr Groysman stated this during an Hour of Questions to the Government at the Verkhovna Rada of Ukraine on Friday, May 20.

"Market-based, completely open and transparent pricing gives an opportunity to destroy corruption schemes, makes it possible to restore Ukrainian gas production as well as Ukrainian [energy] independence. We can achieve our full gas independence within 3-4 years," said Volodymyr Groysman.

The Prime Minister recalled that the day before the Government decided to establish a single market-based price for gas. As a result of this step, the gas price is determined by the market, particularly on the German stock exchange, from where gas is supplied to Ukraine, and not "artificially, by any contract." According to him, pricing and available offers can be traced online. However, as soon as the gas price falls on the stock exchanges, the price in Ukraine will also decline, noted Vologymyr Groysman.

The Prime Minister stressed that for ten years Ukraine underwent the purposeful policy aimed at destroying its own oil and gas production. "It was done quite deliberately in order to destroy the domestic production, be dependent on Russian gas. But for us it might conceivably have been complete energy, economic dependence, including the independence of our country," he emphasized.

The Prime Minister reminded the previous practice when 7-8 years ago the Russian gas supplied to Ukraine was worth USD 235. At the same time, the Ukrainian Government has fixed the price at USD450 per thousand cubic meters and instructed Naftogaz. "We understand that this is more than ten thousand hryvnias per thousand cubic meters. This has in fact led to a threat to national security," underlined Volodymyr Groysman.

Thus, during 2006-2013 years state-owned JSC Ukrgazvydobuvannia - "the only unique company that produces Ukrainian gas" – has received only a few permits to produce gas while private enterprises have received more than 150 licenses. In turn, none of these companies has sold gas below market value, said Volodymyr Groysman.

He also noted that "there was no cost at UAH 1590 for Ukrainian gas - it was a deliberately understated cost of gas in order to lead Ukrgazvydobuvannia to poverty and bankruptcy." Thus, last year the company suffered hundreds of millions of losses from its activity, pointed out the Prime Minister.

The Prime Minister gave the example of Shebelynka gas-condensate field, which he visited last week. According to him, the company still operates outdated equipment of 1971, however, it has "not a single hryvnia for modernization." "This is an absolute destruction of Ukrainian independence," he highlighted.

The Head of the Government stressed that NJSC Naftogaz Ukrainy always compensated the difference which was formed by reducing the price for the public. "There was no social justice and targeting as a person with high income, big house also paid UAH 3600 for this amount of cubes," he noted.

Furthermore, the dual gas pricing encouraged corruption. This made it possible to write off gas to the population at a lower price, while reselling gas to commercial structures at inflated prices. Thus, the State budget had to compensate billions to the companies. "This deal totaled for Ukraine billions of dollars of losses annually and 53 billion during its independence," said Volodymyr Groysman.

The establishment of a market-based gas price will not only give an opportunity to curb corruption and stimulate the domestic production, but also to improve the situation in energy efficiency, reducing energy consumption and renewal of energy sources.

However, we will ensure social justice for vulnerable groups of the population due to the subsidy mechanisms. In addition, the Government is working on the introduction of e-services for the provision of subsidies, said Volodymyr Groysman.