December 26, 2012 - 14:33 AMT
Ukrainian energy company to get $3.7bn loan from China

Ukraine’s national energy company Naftogaz will receive a $3.7 billion loan from China to finance a program to substitute gas with coal, the Ukrainian government’s press office said on Wednesday, Dec 26, according to RIA Novosti.

“On December 25, 2012, a loan agreement between Natfogaz and State Development Bank of China on financing the program of natural gas substitution with Ukrainian coal worth a total of $3.656 billion against the Ukrainian government’s guarantees was signed in the Ukrainian Cabinet of Ministers in the presence of Deputy Prime Minister Yuriy Boyko,” the statement said.

The program envisages measures to introduce coal-water fuel technology to domestic heat and power plants, and to build coal-to-gas conversion facilities allowing Ukraine, which is heavily dependent on costly Russian gas imports, to substitute about 4 billion cubic meters of gas with coal. This would save the country $1.5 billion a year on average, the statement said.

Ukraine imports about two-thirds of the gas it consumes from Russia under a 2009 deal that ties the gas price to oil prices, which have risen strongly since 2009, boosting Ukraine's gas bill.

Naftogaz imported Russian gas at $416 per 1,000 cubic meters in the first quarter of this year, at around $425 in the second quarter, at $426 in the third quarter and will have to pay around $432 in the fourth quarter.

Ukraine has long sought to alter the terms of the gas deal it signed with Russia in 2009, insisting on both price and volume cuts, but these attempts have failed to deliver the result desired, prompting the ex-Soviet republic to seek alternative gas supply options to cut its huge energy bill.