Falling Ukraine VTP prices may help resurrect gas market competition – trading association CEO

Ukrainian VTP prices are converging with EU values

Falling prices could incentivise return to free market rules

Gas Traders of Ukraine CEO says softening supply risks could see cross-border trading resume

LONDON (ICIS)–Ukraine could lift gas trading regulatory restrictions and revert to free market arrangements as a window of opportunity is opening up, the CEO of the association Gas Traders of Ukraine said.

Andrii Myzovets said falling gas prices on the Ukrainian domestic market may soon converge with tariffs on the regulated household segment, which means the cap could be lifted if the downward trend continues.

The government implemented martial law at the start of Russia’s invasion of Ukraine in February 2022.

This translated into restrictions across the board, including the gas market, where household tariffs were capped and gas exports banned.

As civilian infrastructure has come under attack over the last two years, gas demand has fallen, with this decrease exacerbated by bearish fundamentals.

Front month Ukraine VTP prices exclusive of value added tax (VAT) have been falling below Ukraine hryvnia (UAH) 11,300/kscm (€25.75/MWh). To compare, the Ukrainian regulated household tariff exclusive of VAT is UAH 6,633/kscm and exceeds UAH 7,000/kscm when retail related charges are added.


The household segment is critical to revitalising the wholesale and retail markets because demand from industrial consumers who buy at free market prices has shrunk.

Myzovets said industrial consumption prior to the war was close to 10 billion cubic meters (bcm) annually.

However, industrial demand has now dropped to 4bcm/year.

Ukraine’s overall annual demand has now shrunk by a third to nearly 20bcm/year.

This means that most of the remaining demand is covered by the state-owned producer Naftogaz at regulated tariffs.

Since the start of the war, Naftogaz has consolidated its position, either expanding domestic output via its production arms Ukrgasvydobuvannya (UGV), taking over nationalised distribution assets, expanding its retail services or dominating the wholesale market by snapping up volumes produced by indepedents.

By the end of 2023, Naftogaz’s total share in production was 74%.

While UGV and Ukrnafta increased their production by more than 5% in 2023 compared to the previous year, independents saw their output plunge by 15% as some of the privately-owned assets were nationalised.

Prior to the start of war, Ukraine had sought to liberalise its wholesale and retail markets, successfully lifting all price caps in August 2020, in line with commitments to align with EU free market rules.

Nevertheless, rising demand following the lifting of covid related lockdown restrictions and the turmoil sparked by war also led to a decoupling of the Ukrainian market from neighbouring EU hubs.


Myzovets believes that as supply risks are now softening, there is a case to lift other restrictions including a ban on gas exports from the internal market and reignite cross-border trading.

Non-resident traders who are injecting gas in storage can reexport the gas to their home markets but locally produced volumes cannot be sold abroad.

Cross-border trading with neighbouring EU markets came to a halt after the war as companies could not afford to buy comparatively more expensive gas on hubs. Naftogaz has also sought to pause its dependence on imports to limit costs.

Nevertheless, as Ukrainian and EU hub prices are now beginning to align, there could be greater incentives to rekindle cross-border trading interest.

Finally, Myzovets also believes that by allowing the privatisation of smaller shares in the state-producer UGV, the state could also help to increase competition and gradually revert to pre-war free market arragements.

“Naftogaz could keep a majority stake and sell smaller shares to western buyers,” he said.

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