KIEV, Feb. 22 - Ukraine plans to turn its national energy company Naftogaz Ukrayiny into a publicly traded company by selling some of its shares at an IPO, Energy and Coal Industry Minister Yuriy Boyko said Tuesday.

The comment confirms earlier speculations that the government has been considering the IPO of Naftogaz, the largest shipper of Russian natural gas to Europe.

“The key in the oil and gas sector is reforming Naftogaz,” Boyko said at an economic conference in Kiev. “The result of the reform will be a transparent European company whose shares will be traded on a stock market.”

Boyko did not give any timeframe for when the transition to the publicly traded stock company may take place, neither had he indicated where exactly the IPO would be held.

The move may require a major overhaul of Ukrainian legislation, which currently prohibits privatization of Naftogaz by declaring the natural gas pipelines ‘strategic’ assets of Ukraine.

Ukraine moves about 100 billion cubic meters of Russian gas to markets in the European Union, which is about one fourth of Europe’s annual demand.

Ukraine is expected to earn about $2.7 billion from moving Russian natural gas to markets in Europe in 2011, up from about $2.6 billion earned in 2010, according to Naftogaz officials.

Despite running a profitable business of shipping Russian gas to Europe, Naftogaz has been facing serious financial difficulties over the past several years and has been increasingly relying on the government’s subsidies due to unprofitable domestic gas market operation.

The government due to political reasons for years has been refusing to hike domestic gas prices to market levels and has been forcing Naftogaz to sell Russian gas to Ukrainian households at a discount.

Although the government increased domestic gas prices 50% from August 1, 2010, it has been again seeking to postpone another 50% hike that is due on April 1.

The government repeatedly injected capital into Naftogaz to help the company pay for Russian gas imports over the past several years.

Naftogaz reported 680.2 million hryvnias in profits on sales of 59.6 billion hryvnias in January through September, according to company data. The sales rose 13.5% on the year in the period.

The figures have been calculated according to Ukrainian accounting standards that differ from western accounting standards.

Ukraine’s transit of Russian natural gas to markets in Europe fell 3.1% month-on-month to 10.05 billion cu m in January from 10.37 bcm in December 2010, UkrTransGaz, Naftogaz’s gas shipping arm, reported.

At the same time, gas transit in January increased by 3.3% in comparison with January 2010, when the country shipped 9.73 Bcm of Russian gas to Europe, the company said.

In 2010 Ukraine’s transit of Russian gas to Europe increased by 2.8% year-on-year to 95.4 billion cubic meters, up from 92.8 billion cubic meters shipped in 2009, according to Naftogaz. (sb/ez)