Ukraine seeks 15-year gas deal with Russia

By Pavel Polityuk

KIEV, May 7 (Reuters) - Ukraine's state energy firm Naftogaz is seeking a 15-year contract from Gazprom (GAZP.MM) which would fix gas import price increases for the next five years, the head of the firm, Oleh Dubyna told reporters on Wednesday.

Russia and Ukraine have had periodic disputes in recent years over gas prices which have led to supply cuts, including one at the beginning of 2006 which briefly affected European Union countries.

The ex-Soviet state transits some 115 billion cubic metres of gas westwards, accounting for almost a quarter of the European Union's needs and some 80 percent of Russia's total gas exports.

The latest row was resolved last month, when Naftogaz and Gazprom signed a 2008 supply contract for 55 billion cubic metres (bcm) at $179.5 per 1,000 cubic metres -- an increase from $130 last year and $95 in 2006.

"I would like to have at first a contract in which it will be precisely noted -- from the current $179, in the next 5 years, there will be percentage rises every year. And this will be fixed," Dubyna said.

As an ex-Soviet state, Ukraine had long enjoyed subsidised energy prices from Russia.

Moscow now wants to raise these to market levels but the yearly negotiations became especially fierce after the 2004 "Orange" revolution which swept to power the Western-leaning President Viktor Yushchenko.

Dubyna acknowledged that Ukraine would have to pay market prices at some point but wanted the increases to be predictable.

"We need a long-term contract in which there would be gradual price rises towards central European prices worked out by some kind of formula," he said.

DEAL MUST SUIT GAZPROM

He said the government is looking over a two-pronged agreement that Naftogaz has prepared comprising of contracts on transit and domestic supplies. He did not say what price Ukraine could pay next year, though he expected an increase.

Dubyna said there should be a direct contract between Naftogaz and Gazprom, getting rid of the RosUkrEnergo intermediary which the Ukrainian government accuses of masking corruption in the complex regional gas transit system.

"The supply system should suit both Gazprom and Ukraine," he said.

Dubyna also said the oil flow in the Odessa-Brody-Plock pipeline could be reversed to the original aim of pumping Azeri oil via the Black Sea to Poland in the second half of this year. Warsaw and Kiev have talked of doing this for several years.