Ukrainian Oil & Gas Association Speaks on Electronic Auctions for Petroleum Products Sale

Monday, 4 Dec 2017

Ukrainian Oil & Gas Association Speaks on Electronic Auctions for Petroleum Products Sale

Ukrainian Oil & Gas Association Speaks on Electronic Auctions for Petroleum Products Sale

On December 1, the Public Council of the Ministry for Economic Development has discussed among other issues the mechanism of commodity-exchange auctions for sale of crude oil, condensed gas of proprietary production and liquefied gas.

Experts of the Ukrainian Oil & Gas Association have introduced their proposals regarding the draft changes into the relevant resolution of the Cabinet of Ministers on improvement of the mechanism of auction sale of energy commodities.

The Association has stated particularly, that the proposed document does not take into account the current economic features of the Ukrainian market of petroleum products. For example, the prices of both long-term and short-term contracts are established based on weekly or by-weekly, or monthly quotations of the international agencies Platts and Argus. Neither state entities nor private companies use in their accounting the UN statistical data, let alone figures of previous years. This approach might lead to financial losses of the state entities and reduction of the attractiveness of participation in commodity-exchange trading for market players.

It is unacceptable to attempt restricting the difference between auction prices and retail prices at gas stations, since that contradicts market-pricing principles in general. The initial price affects exclusively the amount of contribution of an auction participant and depends only on the situation at the liquefied gas market in Ukraine.

Besides that, significant qualitative changes were introduced to the mechanism, conditions and procedure of electronic trading of the Ukrainian liquefied gas by the Resolution of the Cabinet of Ministers of Ukraine No. 882 dated October 4, 2017. Market participants believe that these processes do not require any extra regulation.

At the same time, the Ukrainian Oil & Gas Association considers the netback pricing of liquefied gas with customs data to be substantiated, since the share of imported resources at the market makes over 70%. This measure excludes any chance to manipulate the market and allows setting the resource prices on the arms-length terms and making them fairer.

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