MOSCOW, Jan. 19 – Gazprom and Naftogaz Ukrayiny on Monday signed a 10-year contract that for the first time ever establishes a formula to calculate future natural gas prices between the two.

The deal, signed in the presence of Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko in Moscow, ends a 20-day standoff between Russia and Ukraine that had disrupted gas supplies to the European Union.

“I am thankful to Vladimir Vladimirovich [Putin] and his entire team that they have found an opportunity to make special conditions for Ukraine, which is a 20% discount on gas price,” Tymoshenko said after the deal had been signed.

Putin responded: “I want to express gratitude to Prime Minister Yulia Vladimirovna Tymoshenko. In a difficult situation she has taken responsibility for approving these super important decisions that had helped to end the deadlock.”

In the deal, Gazprom agreed to provide the 20% discount on market gas prices in 2009, while Naftogaz has agreed to keep unchanged the fee that it charges the Russian gas company for transit of its gas to Europe.

Naftogaz was charging Gazprom $1.7 for shipment of 1,000 cubic meters for a distance of 100 km in 2008 and paid $179.5 per 1,000 cubic meters.

Although the exact gas price to be charged in 2009 was not disclosed, Deputy Prime Minister Hryhoriy Nemyria said the price will probably not exceed $235 per 1,000 cubic meters.

This represents a compromise.

Gazprom’s best offer so far was setting the price of gas at $250/1,000 cu m and keeping the transit fee unchanged at $1.7, while Naftogaz’s best offer so far setting gas price at $235/1,000 cu m and increasing the transit fee to $1.8.

The Tymoshenko government back in August 2008 predicted the average gas price at $250 per 1,000 cu m in 2009, but the forecast was made before the spectacular collapse of crude oil prices in the second half of 2008.

Tymoshenko said the 20% discount was important for Ukraine to get ready for marker based price that will apparently be in place in 2010.

“This gives Ukraine one extra year to work on the system of diversification of energy consumption and do everything for Ukraine to experience that the world gas price requires completely different attitude towards energy consumption,” Tymoshenko said.

The new formula for calculating gas prices was not disclosed, but Namyria said it includes prices for crude oil, fuel oil and gasoil, all market-traded commodities. The formula will be used for calculating the gas price in 2009, with a 20% discount.

“Since Ukraine is using the formula for the first time, we will announce the [gas] price in two or three days,” Tymoshenko said.

The formula will calculate the gas prices every quarter, but Tymoshenko said that for convenience of Ukrainian companies the price announced by the government will cover the entire year of 2009. (sb/ez)