Rise in Ukrainian gas transmission operator's costs in 2025 from lack of transit offset by higher transportation fees - MinFin

MOSCOW. Oct 31 (Interfax) - Higher prices for transporting natural gas are expected to offset the increased costs of operating Ukraine's gas transportation system in the absence of Russian transit starting in 2025.

"However, the negative scenario foresees expenses being offset by consumers of services to a lesser degree, which leads to the lower profitability of the Gas Transmission System Operator of Ukraine [GTSOU]'s operations," Ukrainian media quoted the Ukrainian Finance Ministry's annual Fiscal Risks Report as saying. The report is based on data from state companies and was prepared as part of the adoption of the 2025 state budget.

As part of the report, three possible development scenarios were modeled for each of the eight largest state companies, based on macroeconomic scenarios developed by the Ukrainian Economy Ministry. Each state enterprise provided input data on specific variables for each scenario.

According to various scenarios provided in the Finance Ministry's document, from 2025 the cost of gas transportation will rise by up to UAH 0.46-0.47 per cubic meter or by up to UAH 0.59-0.75 per cubic meter, while capital expenditures for developing the gas transport system will be in the range of UAH 4 billion a year.

Despite the termination of the agreement on natural gas transit with JSC Gazprom at the end of 2024, in all scenarios the operations of GTSOU are expected to be profitable in the medium term, except for 2028 in the negative scenario when the company may operate at a loss.

At the same time, none of the scenarios contains provisions on transit agreements that should be concluded with European buyers.

"Net revenue to the budget from GTSOU is expected in the medium term across all scenarios, as it primarily comes in the form of taxes and dividends related to the company's profitability," the Finance Ministry said.

The GTSOU's operations were profitable in 2023, while losses were recorded in 2022. Profits were lower because gas transit remained at a low level of around 20-30 million cubic meters a day. However, the company significantly cut operational expenses.

In 2022, the GTSOU undertook significant asset impairments due to the low likelihood of extending the transit agreement with Gazprom. It is currently developing options for gas transit with European buyers.

GTSOU's liquidity remains constrained, and the ratios of the operator's debt to its assets and equity are low, as it does not have significant debts.

GTSOU ensures the transportation of natural gas to consumers in Ukraine and the EU.